# FREE Financial Management For Project Managers Financial Ratio Questions and Answers

#### What conclusions can be drawn from a company's market to book value ratio being the same as the industry average and its ROE being lower than the industry average?

Yes you are correct, the company has a higher P/E ratio than other firms in the industry

#### If the margin of safety is Rs. 25000 and the budgeted income is Rs. 45000, what will be the margin of safety in percentage terms?

A financial term called the margin of safety quantifies how far a company's real sales or revenue can fall before it reaches the breakeven point. It shows the safety net or buffer a business has in place for its sales volume above the breakeven point.

#### What will be the unit margin of safety if the breakeven sales per unit are 12 and the planned sales per unit are 50?

Yes you are correct, 38

#### What is determined when the gross margin is applied to the cost of the products sold?

It is a financial metric that represents the difference between the revenue generated from the sale of products or services and the direct costs associated with producing those products or services.

#### How much of a contribution margin will bundle it have? The bundle's contribution margin is Rs. 40,000, while its income is Rs. 15,000

Yes you are correct, 0.03

#### What is determined when gross margin is proportional to revenues?

The difference between total revenue (revenues) and the cost of goods sold is referred to as "gross margin" (COGS). It is the fraction of revenue that is left over after direct costs for manufacturing the sold goods or services have been subtracted. The gross margin calculation formula is as follows:

#### How much will the fross profit ratio be? If the sale price is set at a 25% premium to the cost

Yes you are correct, 0.2

#### What is determined when operating income is divided by contribution margin?

A financial indicator called the degree of operational leverage (DOL) assesses how sensitive a company's operating profitability is to changes in its sales revenue. It sheds light on how variations in sales can impact the operating revenue or operating profit of a business.

#### What contains the net profit ratio calculation formulas?

A financial indicator used to evaluate a company's profitability in relation to net sales is the net profit ratio. It is the portion of each rupee (or unit of currency) of net sales that, when all costs are subtracted, represents net profit. To determine the net profit ratio, use the following formula:

#### How are liquidity ratios expressed?

Financial ratios called liquidity ratios assess a company's capacity to satisfy its immediate financial obligations with the help of its most liquid assets. These parameters shed light on the company's near-term financial stability and capacity to meet its short-term financial obligations.

#### How to calculate the gross profit ratio?

Yes you are correct, (Gross Profit/Net sales)*100

#### When the opening stock is Rs. 31,000, what would the stock turnover rate be? the closing stock price is Rs. Sales are Rs. 320000, and the gross profit margin is 25%.

Yes you are correct, 8 times

#### What is the company's tangible net worth if the debt equity ratio is 2:1 on the balance sheet? There are Rs. 12 lac long-term sources.

A financial ratio called the debt-equity ratio calculates how much debt a company has in relation to its equity. By dividing the whole debt by the total equity, it is determined.

#### Which ratio is regarded as a safe selvency margin?

Yes you are correct, Current ratio

#### If sales are 20,000 and gross profit is 30,000, what will be the gross profit ratio?

The ratio of gross profit to net sales, commonly referred to as the gross profit ratio or the gross margin ratio, is a financial measure (revenue). The difference between total revenue and the cost of products sold is used to determine gross profit (COGS).

#### What might be violated if a business's asset turnover ratio is lower than the industry average?

The asset turnover ratio is a financial measurement that assesses how effectively a company uses its assets to generate sales revenue. The company may not be earning as much revenue in relation to its total assets as its competitors if its asset turnover ratio is lower than the industry average.