FIN 320F Exam 1 Working Words (Duvic) Questions and Answers Rated A+
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FIN 320F Exm 1 Working Words
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FIN 320F Exm 1 Working Words
FIN 320F Exam 1 Working Words (Duvic)
Questions and Answers Rated A+
What is the function of financial ratios in financial analysis?
To assess a company’s performance and financial health by comparing various financial
metrics.
What does "net present value" (NPV) measure?
The value of...
FIN 320F Exam 1 Working Words (Duvic)
Questions and Answers Rated A+
What is the function of financial ratios in financial analysis?
✔✔ To assess a company’s performance and financial health by comparing various financial
metrics.
What does "net present value" (NPV) measure?
✔✔ The value of an investment's future cash flows discounted back to their present value, minus
the initial investment cost.
How does "return on assets" (ROA) reflect a company's efficiency?
✔✔ By showing how effectively a company uses its assets to generate profit.
What is the significance of "earnings before interest and taxes" (EBIT)?
✔✔ It measures a company’s profitability from core operations before considering interest and
tax expenses.
How is "free cash flow" (FCF) calculated?
1
,✔✔ By subtracting capital expenditures from operating cash flow.
What is "financial leverage" and how is it used?
✔✔ Financial leverage refers to using borrowed funds to increase the potential return on
investment.
What does "inventory turnover ratio" indicate?
✔✔ How quickly a company sells its inventory within a given period.
How does "price-to-earnings" (P/E) ratio provide insight into a company's stock valuation?
✔✔ It compares the company's current share price to its earnings per share, indicating how much
investors are willing to pay per dollar of earnings.
What does "interest coverage ratio" measure?
✔✔ The company’s ability to meet its interest payments on outstanding debt, calculated by
dividing EBIT by interest expenses.
How is "operating margin" useful in assessing business performance?
2
, ✔✔ It measures the percentage of revenue that remains after covering operating expenses,
reflecting operational efficiency.
What is the purpose of conducting a break-even analysis?
✔✔ To determine the level of sales needed to cover all fixed and variable costs, resulting in
neither profit nor loss.
How does "current ratio" help in evaluating a company’s financial health?
✔✔ It assesses the company’s ability to pay short-term liabilities with short-term assets.
What role does "depreciation" play in financial statements?
✔✔ Depreciation allocates the cost of a tangible asset over its useful life, affecting net income
and asset values.
What is meant by "working capital management"?
✔✔ It involves managing a company's short-term assets and liabilities to ensure operational
efficiency and liquidity.
How does "profit margin" reflect a company's profitability?
3
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