Financial Management for Project Managers Financial Ratio 2

Question 1

A project has total assets of $500,000 and total liabilities of $200,000. What is the debt-to-equity ratio?

Accepted Answer

0.67

Answer

Equity = $500,000 - $200,000 = $300,000; Debt-to-Equity = $200,000 / $300,000 = 0.67.

Question 2

Which financial ratio best measures a project's ability to generate profit relative to its revenue?

Accepted Answer

Net profit margin

Answer

Net profit margin = Net Income / Revenue, directly measuring profitability per dollar of revenue.

Question 3

A project reports EBIT of $80,000 and interest expense of $20,000. What is the interest coverage ratio?

Accepted Answer

4.0

Answer

Interest Coverage Ratio = EBIT / Interest Expense = $80,000 / $20,000 = 4.0.

Question 4

When a project manager evaluates the quick ratio, which asset is EXCLUDED that the current ratio includes?

Accepted Answer

Inventory

Answer

The quick ratio excludes inventory because it is less liquid than cash, receivables, or marketable securities.

Question 5

A project's return on investment (ROI) is 25%. If the net profit is $50,000, what was the total investment?

Accepted Answer

$200,000

Answer

ROI = Net Profit / Investment; Investment = $50,000 / 0.25 = $200,000.

Financial Management for Project Managers Practice Test