U1 AOS 2 Revision- Liquidity Flashcards
(14 cards)
What is cash flow cover?
Cash flow cover refers to the ability of a business to meet its financial obligations using its operational cash flow.
True or False: A cash flow cover ratio of less than 1 indicates that a company can cover its expenses with its cash flow.
False
Fill in the blank: The cash flow cover ratio is calculated by dividing ________ by ________.
operating cash flow; total liabilities
What is considered a healthy cash flow cover ratio?
A cash flow cover ratio of 1.5 or higher is generally considered healthy.
Multiple Choice: Which of the following factors can negatively impact cash flow cover? A) Increased sales B) High operating expenses C) Efficient inventory management D) Strong customer payments
B) High operating expenses
What is the formula for calculating the working capital ratio?
Working Capital Ratio = Current Assets / Current Liabilities
True or False: A working capital ratio of less than 1 indicates that a company may have liquidity problems.
True
Fill in the blank: A working capital ratio of 2:1 is generally considered ________.
healthy
What does a working capital ratio above 1 signify?
It indicates that a company has more current assets than current liabilities.
Multiple Choice: Which of the following is NOT a component of current assets? A) Cash B) Inventory C) Long-term debt D) Accounts receivable
C) Long-term debt
What are non-financial indicators of business performance?
Metrics that assess aspects of a business’s performance not directly related to financial outcomes, such as customer satisfaction and employee engagement.
True or False: Non-financial indicators can provide insights into future financial performance.
True
Fill in the blank: An example of a non-financial indicator is __________.
customer retention rate
Which of the following is NOT a non-financial indicator? A) Employee turnover B) Net profit margin C) Customer satisfaction
B) Net profit margin
