Financial Ratios
Essay Practice Activity
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- Differentiate between key financial ratios for making business decisions, including profit margin, return on equity, and debt to equity ratio.
- Assess the implications of financial ratios for the future performance of a company.
LearningOutcomes
By completing this activity, you will:
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Essay Introduction
Businesses use different types of financial ratios to understand how well they are performing and how risky their financial position might be. Before answering, think about what each type of ratio tells us — and why that information would matter to people who invest in or lend money to the business. Review the feedback after you submit your response to see how accurate you were!
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Essay prompt
Please answer the essay question below
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Essay Response Guide
Take a moment to review your response using the criteria below. Assess how many of these points you addressed in your response. Once you’re ready to move forward, click “Next” button below to continue.
Activity Ratios
Debt Ratios
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Thank you for completing this essay activity!
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All instructional content, including AI-assisted adaptations and custom interactive learning activities created on Genially is licensed by Saylor Academy under the 'Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) license. All Genially proprietary elements such as templates, themes, built-in assets, stock media, and other “Genially Content” remain subject to Genially's Terms of Service and are not covered by this Creative Commons license. These elements must remain embedded in the course and cannot be reused or redistributed independently.
Activity Ratios
Activity ratios measure how efficiently a company uses its assets and resources to generate sales or revenue. They help show how well management is handling day-to-day operations — for example, how quickly inventory is sold, how efficiently accounts receivable are collected, or how productively assets are used. Common activity ratios include inventory turnover, accounts receivable turnover, and total asset turnover.
Debt Ratios
Debt ratios, on the other hand, indicate how much of a company’s assets are financed through debt versus equity. These ratios are important to lenders and investors because they show the company’s level of financial risk. A high debt ratio suggests that the company relies heavily on borrowed funds, which could make it harder to meet obligations if earnings decline. Conversely, a low debt ratio indicates a more conservative financial structure with less risk of default.
(4.4) Practice: Essay - Financial Ratios
Saylor Academy
Created on January 26, 2026
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Transcript
Financial Ratios
Essay Practice Activity
START
LearningOutcomes
By completing this activity, you will:
Back
Next
Essay Introduction
Businesses use different types of financial ratios to understand how well they are performing and how risky their financial position might be. Before answering, think about what each type of ratio tells us — and why that information would matter to people who invest in or lend money to the business. Review the feedback after you submit your response to see how accurate you were!
Back
Next
Essay prompt
Please answer the essay question below
Back
Next
Essay Response Guide
Take a moment to review your response using the criteria below. Assess how many of these points you addressed in your response. Once you’re ready to move forward, click “Next” button below to continue.
Activity Ratios
Debt Ratios
Click on the arrows to learn more!
Back
Next
Thank you for completing this essay activity!
Restart
All instructional content, including AI-assisted adaptations and custom interactive learning activities created on Genially is licensed by Saylor Academy under the 'Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) license. All Genially proprietary elements such as templates, themes, built-in assets, stock media, and other “Genially Content” remain subject to Genially's Terms of Service and are not covered by this Creative Commons license. These elements must remain embedded in the course and cannot be reused or redistributed independently.
Activity Ratios
Activity ratios measure how efficiently a company uses its assets and resources to generate sales or revenue. They help show how well management is handling day-to-day operations — for example, how quickly inventory is sold, how efficiently accounts receivable are collected, or how productively assets are used. Common activity ratios include inventory turnover, accounts receivable turnover, and total asset turnover.
Debt Ratios
Debt ratios, on the other hand, indicate how much of a company’s assets are financed through debt versus equity. These ratios are important to lenders and investors because they show the company’s level of financial risk. A high debt ratio suggests that the company relies heavily on borrowed funds, which could make it harder to meet obligations if earnings decline. Conversely, a low debt ratio indicates a more conservative financial structure with less risk of default.