Statement of Financial Position
What is the formula for calculating the current ratio?
Current Assets ÷ Current Liabilities.
What is the formula for calculating net profit?
Total Revenue - Total Expenses.
What financial objective focuses on increasing the size of the business?
Growth.
What type of finance involves borrowing money that must be repaid with interest?
Debt finance.
What macro environmental factor includes changes in tax laws?
Political factors.
What is the formula for calculating the debt ratio?
Total Liabilities ÷ Total Assets.
What is the formula for calculating the net profit ratio?
(Net Profit ÷ Total Revenue) × 100.
What financial objective is concerned with the business's ability to pay off its debts as they fall due?
Liquidity.
What type of finance involves selling ownership shares in the company?
Equity finance.
Which macro environmental factor deals with changes in consumer behavior?
Social factors.
If a business has $10,000 in current assets and $5,000 in current liabilities, what is its current ratio?
2:1
If a business has $50,000 in total revenue and $10,000 in net profit, what is the net profit ratio?
20%.
What financial objective is about maximizing the return on investments?
Profitability.
Which source of finance does not require repayment?
Equity finance.
What macro environmental factor includes technological advancements?
Technological factors.
If a business has $40,000 in total liabilities and $100,000 in total assets, what is its debt ratio?
0.4 or 40%.
If expenses exceed revenue, what does this result in?
A net loss.
What financial objective is concerned with using resources efficiently to achieve goals?
Efficiency.
Which source of finance can increase a company’s financial risk by increasing its debt ratio?
Debt finance.
What is the macro environmental factor that includes inflation and unemployment rates?
Economic factors.
If a company’s current ratio is less than 1, what does this indicate?
The company may struggle to pay its short-term liabilities.
What financial statement shows a company’s profitability over a specific period?
The Income Statement or Profit or Loss Statement.
What financial objective ensures the business can meet its long-term obligations?
Solvency.
What is the term for the initial money invested by the owners in a business?
Equity capital.
What does the PEST analysis stand for in macro environmental factors?
Political, Economic, Social, Technological.