Question

If you are a supplier that requires payment of the amount due in 2 weeks, which financial ratio of your customer would you look at before extending your credit?

Select one:

a. Cash coverage ratio

b. Quick ratio

c. Total debt ratio

d. Current ratio

e. Cash ratio

2.

Given the following information, calculate the net income.

Fixed asset turnover ratio = 4, Profit margin = 20%, Net fixed asset = $25,000

Select one:

a. $22,000

b. $20,000

c. $24,000

d. $16,000

e. $18,000

3.A supplier that provides trade credits to a company would be interested in the company's ___________ratio.

Select one:

a. Profitability ratio

b. Liquidity ratio

c. Financial leverage ratio

d. Market value ratio

e. Asset utilization turnover ratio

Answer 1

1. If you are a supplier that requires payment of the amount due in 2 weeks, which financial ratio of your customer would you look at before extending your credit-

E. Cash ratio

Cash ratio is used to measure the liquidity of a company. If a company has to make an immediate payments of it's current liabilities, it shows if the company will be able to make the payment without liquidation other liabilities.

2. please refer to the image below-

3. Supplier that provides trade credit to a company would be interested in the companies-

B. Liquidity ratio

Liquidity ratio is calculated by dividing the liquid assets buy current liability obligations. It shows the number of times the current liability requirement.