Financial ratios are used to assess and forecast financial and business performance. Match the financial ratio with its indicator/measure group. Place X in the correct cell to show what each financial ratio indicates or measures.

Financial ratio	Liquidity	Activity	Leverage	Valuation	Profit
Price-earnings ratio = Share price / Earnings per share
Debt ratio = Total liabilities / Total assets
Inventory turnover ratio = cost of goods sold / Average inventory
Current ratio = Current assets / Current liabilities
Asset turnover ratio = Sales / Total assets
Net profit ratio = NPAT / Sales
Earnings per share ratio = NPAT / Total shares outstanding

 

List 3 ways you could identify and/or quantify cashflows

 

The following evaluation methods use future cash flows. What are the main features and functions of each evaluation method?

Evaluation method	Main features and functions
Payback period
Accounting rate of return
Net Present Value