Learning Outcome 7 Analyse businesses using financial ratios Chapter 9

Question 1

Profit divided by share capital plus reserves plus borrowings equals...?
A. Gross profit percentage ratio
B. Net profit percentage ratio
C. Return on capital employed
D. The current ratio

Answer 1

C. Return on capital

Question 2

The quick ratio measures...?
A. Liquidity
B. Solvency
C. Efficiency
D. Productivity

Answer 2

A. Liquidity

Question 3

What is a good figure for the gearing ratio (depending on the business)?
A. 0-10%
B. 20-50%
C. 80-110%
D. 100%+

Answer 3

C. 80-110%

Question 4

The solvency ratio of an insurance company is calculated as:
A. Assets less liabilities
B. Assets plus liabilities
C. Net assets divided by net liabilities
D. Net assets divided by earned premium net of reinsurance

Answer 4

D. Net assets divided by earned premium net of reinsurance