The Key Numbers That Financial Managers Use to Calculate Ratios

question 54

Multiple Choice

The key numbers that financial managers use to calculate ratios usually come from which of the following financial statements of a firm?

• A)pro forma statements
• B)prospectus and operating budget
• C)balance sheet and income statement
• D)statement of cash flows

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Definitions:

Financial Statements

Formal records of the financial activities and condition of a business, entity, or individual, including balance sheet, income statement, and cash flow statement.

ROA

Return on Assets, a financial ratio that indicates how profitable a company is relative to its total assets, measuring how efficient management is in using assets to generate earnings.

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company is using its equity to create profits.