Profitability and Liquidity Ratio Analysis Quiz by Shubhrata Shrestha | Aug 28, 2025 | 0 comments Profitability and Liquidity Ratio Analysis Quiz 1. Gross Profit Margin (GPM) is calculated using: a) (Net Profit ÷ Sales Revenue) × 100 b) (Gross Profit ÷ Sales Revenue) × 100 c) (Gross Profit ÷ Capital Employed) × 100 d) (Sales Revenue ÷ Gross Profit) × 100 None 2. If a yoga studio has a profit margin of 25%, it means: a) $25 of gross profit is earned per $100 revenue b) $25 of net profit is earned per $100 revenue c) $25 of capital employed is returned as profit d) $25 of sales is covered by liabilities None 3. ROCE mainly measures: a) Efficiency in covering current liabilities b) Ability to control direct costs c) Return generated from invested capital d) Gross profit earned from sales None 4. Which business shows stronger liquidity if the current ratio is compared? a) 0.9 : 1 b) 1.9 : 1 c) 0.5 : 1 d) 0.7 : 1 None 5. The ideal benchmark for the quick (acid test) ratio is: a) 0.5 : 1 b) 2 : 1 c) 1 : 1 d) 1.5 : 1 None 6. A limitation of raising prices to improve GPM is: a) Higher fixed costs b) Reduced customer demand c) More liquidity risk d) Increase in indirect costs None 7. Which strategy would best improve liquidity ratios? a) Increasing stock levels b) Offering discounts for early cash payments c) Expanding credit purchases d) Reducing cash reserves None 8. A restaurant has a quick ratio of 1.05 : 1. This suggests: a) It has insufficient liquid assets b) It is in a favourable liquidity position c) It cannot pay current liabilities d) It holds too much inventory None 9. A higher profit margin (PM) indicates: a) Better control of indirect costs b) Stronger use of capital employed c) More efficient use of cash reserves d) Reduced liquidity risk None 10. Which is a drawback of using long-term loans to reduce current liabilities? a) Decreases liquidity b) Increases interest costs c) Lowers current assets d) Reduces gross profit margin None Time's up Submit a Comment Cancel replyYour email address will not be published. Required fields are marked *Comment * Name * Email * Website Save my name, email, and website in this browser for the next time I comment. Δ
