45 Lecture

1. What is the purpose of financial ratios? A. To evaluate the company's financial performance B. To determine the regulatory requirements C. To assess the company's management practices D. To determine the market value of the company

Answer: A

2. What is the debt-to-equity ratio? A. A measure of a company's profitability B. A measure of a company's liquidity C. A measure of a company's financial leverage D. A measure of a company's growth prospects

Answer: C

3. What is the return on equity ratio? A. A measure of a company's profitability B. A measure of a company's liquidity C. A measure of a company's financial leverage D. A measure of a company's growth prospects

Answer: A

4. What is the current ratio? A. A measure of a company's profitability B. A measure of a company's liquidity C. A measure of a company's financial leverage D. A measure of a company's growth prospects

Answer: B

5. What is the earnings per share ratio? A. A measure of a company's profitability B. A measure of a company's liquidity C. A measure of a company's financial leverage D. A measure of a company's growth prospects

Answer: A

6. What is the price-to-earnings ratio? A. A measure of a company's profitability B. A measure of a company's liquidity C. A measure of a company's financial leverage D. A measure of a company's valuation

Answer: D

7. Which financial statement provides information on a company's cash inflows and outflows? A. Income statement B. Balance sheet C. Statement of changes in equity D. Cash flow statement

Answer: D

8. What is segment reporting? A. Reporting of financial performance by business segment B. Reporting of financial performance by region C. Reporting of financial performance by product line D. Reporting of financial performance by customer

Answer: A

9. What is the purpose of the management's discussion and analysis section in the annual report? A. To provide investors with management's perspective on the company's financial performance and prospects B. To provide information on the company's board of directors C. To provide information on the company's related party transactions D. To provide information on the company's liquidity position

Answer: A

10. What is the purpose of corporate governance disclosures in the financial statements of listed companies? A. To provide information on the company's policies and practices relating to risk management and internal control B. To provide information on the company's profitability C. To provide information on the company's liquidity position D. To provide information on the company's market value

Answer: A

1. What is meant by market capitalization and how is it calculated? Ans: Market capitalization is the total value of a company's outstanding shares of stock. It is calculated by multiplying the company's current stock price by the total number of outstanding shares.

2. Explain the significance of the price-earnings ratio (P/E ratio). Ans: The P/E ratio is a measure of a company's valuation. It shows how much investors are willing to pay for each dollar of earnings. A high P/E ratio can indicate that investors have high expectations for a company's future earnings growth.

3. What is meant by return on equity (ROE)? How is it calculated? Ans: Return on equity is a measure of a company's profitability that shows how much profit the company generates for each dollar of shareholders' equity. It is calculated by dividing net income by shareholders' equity.

4. What is the current ratio and how is it calculated? Ans: The current ratio is a measure of a company's ability to meet its short-term financial obligations. It is calculated by dividing current assets by current liabilities.

5. What is the debt-to-equity ratio and how is it calculated? Ans: The debt-to-equity ratio is a measure of a company's financial leverage. It shows the proportion of debt to equity used to finance a company's assets. It is calculated by dividing total liabilities by shareholders' equity.

6. How is the inventory turnover ratio calculated and what does it indicate? Ans: The inventory turnover ratio is a measure of how quickly a company sells its inventory. It is calculated by dividing the cost of goods sold by average inventory. A high inventory turnover ratio indicates that a company is selling its inventory quickly.

7. What is the operating margin and how is it calculated? Ans: The operating margin is a measure of a company's operating profitability. It shows the percentage of each dollar of revenue that is left after subtracting the company's operating expenses. It is calculated by dividing operating income by revenue.

8. Explain the significance of the return on assets (ROA) ratio. Ans: The ROA ratio measures a company's efficiency in generating profits from its assets. It shows how much profit the company generates for each dollar of assets. A higher ROA ratio indicates that a company is using its assets more efficiently to generate profits.

9. How is the earnings per share (EPS) calculated and what does it indicate? Ans: The EPS is a measure of a company's profitability on a per-share basis. It is calculated by dividing net income by the number of outstanding shares of common stock. A higher EPS indicates that a company is generating more profits for each share of stock.

10. What is the cash conversion cycle and how is it calculated? Ans: The cash conversion cycle is a measure of a company's efficiency in managing its cash flow. It shows the time it takes for a company to convert its investments in inventory and accounts receivable into cash. It is calculated by adding the average collection period, the average payment period, and the average inventory holding period.

Financial statements of listed companies are crucial documents that provide valuable information to stakeholders, including investors, creditors, and regulatory bodies. These statements are scrutinized by analysts and investors to assess the company's financial performance, stability, and future growth prospects. The financial ratios are an essential tool to measure a company's financial performance and compare it with the industry and peers. The financial ratios provide insights into the company's liquidity, profitability, efficiency, solvency, and market value. The liquidity ratios assess the company's ability to meet its short-term obligations, including current ratio, quick ratio, and cash ratio. Profitability ratios evaluate the company's ability to generate profit from its operations, including gross profit margin, net profit margin, and return on equity. Efficiency ratios measure the company's operational efficiency and effectiveness, including asset turnover and inventory turnover. Solvency ratios assess the company's long-term financial health, including debt-to-equity ratio and interest coverage ratio. In addition to the financial ratios, investors and analysts also use other metrics to evaluate the company's financial performance, including price-to-earnings ratio, price-to-book ratio, and dividend yield. These ratios and metrics help investors and analysts to assess the company's value and growth potential and make informed investment decisions. Overall, financial statements of listed companies and financial ratios are essential tools to assess the company's financial performance and health. Investors and analysts should analyze these documents carefully and use them in conjunction with other information to make informed investment decisions.