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Oduu gammachiisaa... barattoota Waxabajjii dhufu EXIT EXAM qoramtaniif: 80 past exit exam questions with solutions will be available soon in PDF format. After working through each question, you’ll also find 3 similar practice questions.

Liquidity and Current Ratio—Do You Know It? (Every business owner should know this) Can your business pay its short-term expenses (like salaries, rent, utilities, taxes, etc.) when they are due? This ability is called liquidity. So how do we describe liquidity? We say a business has either low liquidity or high liquidity. What does that mean? 1. Low Liquidity = The business struggles to pay its short-term debts and bills. 2. High Liquidity = The business can easily pay what it owes. Now, how do you know if your business has good liquidity or not? Liquidity is measured using something called the Current Ratio. The formula is: Current Ratio = Current Assets ÷ Current Liabilities A. What are Current Assets? Current assets are things your business owns that can be turned into cash within a short time (less than one year). Examples: · Cash in the bank · Money customers owe you (Accounts Receivable) · Products you have ready to sell (Inventory) · Bills you paid in advance (Prepaid Expenses) · Short-term investments that can be quickly turned into cash These, and similar items, are called Current Assets. B. What are Current Liabilities? Current liabilities are debts and bills your business must pay within one year. Examples: · Employee salaries you owe · Rent you owe · Taxes you owe for this year · Utility bills (water, electricity, phone) you owe · Short-term loans you must repay · Money you owe to suppliers for things you bought on credit (Accounts Payable) These, and similar items, are called Current Liabilities. How to Calculate Current Ratio Add up all your Current Assets, then divide by all your Current Liabilities. Example: If your business has Current Assets of 120,000 Birr and Current Liabilities of Qr 60,000 Birr, then: Current Ratio = 120,000 ÷ 60,000 = 2 This means your business is in good shape – you can easily pay your debts. What Does the Current Ratio Tell You? · If Current Ratio is above 1 – Your business has good liquidity. You can pay your short-term debts comfortably. · If Current Ratio equals exactly 1 – Your assets and debts are equal. After you pay everything, you have no cash left. · If Current Ratio is below 1 – Your business has a liquidity problem. You will struggle to pay your debts. What is a Healthy Liquidity Level? A business is considered to have good liquidity if its Current Ratio is between 1.5 and 2.5. Important Note: If your Current Ratio is above 5, that means your business is holding too much cash that is not being used to grow the business. That is also a problem. If you want to read in Afaan Oromoo: https://t.me/BusinessAcadamy/408

How is a Dividend Calculated? It’s simple. First… what does “dividend” actually mean? It’s the portion of a company’s profit that is distributed to its shareholders. (It depends on how many shares you own in that company.) What does that mean? Let me give you an example. 1. Suppose you own 100 shares in a bank. 2. And your friend owns 5,000 shares. Now, the bank’s board of directors decides to pay 500 Birr per share from the profit earned in 2025. You, my dear, own only 100 shares, right? So if they pay you 500 Birr per share: Your share = 100 × 500 = 50,000 Birr That means the bank will pay you 50,000 Birr. Nice! You’ve got yourself some money, my friend! 😀 But what about your friend who owns 5,000 shares? His share = 5,000 × 500 = 2,500,000 Birr The bank pays him 2.5 million Birr. Oh, lucky him… he just grabbed it all! 😔 Now, let’s get serious. This is how a dividend is calculated: Your dividend = (Number of shares you own) × (Amount declared per share) But wait – you don’t get the full 50,000 Birr. There’s something called Dividend Tax (15%): 50,000 – (50,000 × 15%) 50,000 – (50,000 × 0.15) 50,000 – 7,500 = 42,500 Birr So, in the end, 42,500 Birr is the net amount that actually reaches your hand. That’s how stock trading works! ---------- If you want to read in Afaan Oromoo: https://t.me/BusinessAcadamy/404

What is the Difference Between 'Stock' and 'Share'? They have similar meanings. However, there is a slight difference. To make it clear, let's look at a familiar example: In 2024, Ethiotelecom offered 10% of its ownership to the public. Do you remember? The conditions were: Anyone who wanted to buy: - Pays 300 birr per share - Must buy at least 33 shares - Cannot buy more than 3,333 shares This means you can buy a minimum of 33 shares and a maximum of 3,333 shares. Based on this, when we talk about stock and share: What the company offers for sale is called "stock". When this stock is divided into equal parts and sold: - Each individual unit is called a "share." A person buys according to their capacity: • 33 shares = pays 9,900 birr • 100 shares = pays 30,000 birr • 3,333 shares = pays 999,900 birr After buying, the person owns a portion of the company. This ownership interest is called "stock." For example: If someone says, "I own stock in Ethiotelecom," it means they have an ownership interest in the company. But, if asked, "How much do you own?" they state the number of shares. For example, "I own 33 shares." Anyone who owns shares in a company is entitled to a portion of the company's profits (if distributed), based on the number of shares held. In short: • Stock = Ownership interest in a company • Share = A unit of that ownership In fact, stock is generally classified into two types: - Common stock - Preferred stock The one Ethiotelecom offered to the public was common stock (ordinary shares). What is the difference between them? Which one is better? (We will discuss that another time) ---------- If you want to read in Afaan Oromoo:

Debit and Debt — Know the Difference! 😆 When pronounced: • Debit = pronounced "Dee-bit" • Debt = pronounced "Det" (the letter 'b' is silent). 😃 1. Debit relates to the accounting recording system. It shows an increase in assets or expenses. Example: We paid cash to buy a computer or paid electricity and water bills. 👈 This is a "debit". 2. Debt means money borrowed from a bank or an individual that must be repaid in the future. Example: The company borrowed 50,000 birr from a bank. 👈 This is "debt". In short: • Debit: An accounting entry that often shows an increase in assets or expenses. • Debt: Money borrowed that must be repaid in the future. -------- If you want to read in Afaan Oromoo:

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