Financial Ratios Used to Determine Credit Risk Include an Assessment

question 83

Multiple Choice

Financial ratios used to determine credit risk include an assessment of

• A)liquidity and asset utilization.
• B)asset utilization and profitability.
• C)solvency and liquidity.
• D)profitability and solvency.

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Definitions:

Gross Profit

The financial metric that represents the difference between revenue and the cost of goods sold (COGS) before deducting overhead, payroll, taxation, and interest payments.

Net Sales

The revenue a company earns from sales after subtracting the money refunded for returns, compensation for damaged or missing items, and any discounts offered.

Net Purchases

The total amount of purchases made by a business minus returns, allowances, and discounts.

Intraperiod Tax Allocation

The process of apportioning income taxes within a single fiscal period among different sections of a financial statement.