Chapter 15 Flashcards
Whats the acid-test ratio?
The acid-test (quick) ratio is a measure of a company’s immediate short-term liquidity. It is an important complement to the current ratio.
Whats the formula of the acid test ratio?
Acid-Test Ratio = (Cash + Short-Term Investments + Accounts Receivable (net)) ÷ Current Liabilities
Whats the accounts receivable turnover?
The ratio used to assess the liquidity of the receivables is the accounts receivable turnover. It measures the number of times, on average, the company collects receivables during the period. Unless seasonal factors are significant, average net accounts receivable can be computed from the beginning and ending balances of thenet accounts receivable
Whats the formula of the accounts receivable turnover?
Accounts Receivable Turnover = Net Credit Sales ÷Average Net Accounts Receivable
Whats inventory turnover?
Inventory turnover measures the number of times, on average, the inventory is sold during the period. Its purpose is to measure the liquidity of the inventory. Unless seasonal factors are significant, we can use the beginning and ending inventory balances to compute average inventory.
Whats the formula of inventory turnover?
Inventory Turnover = Cost of Goods Sold÷Average Inventory
Whats the profit margin?
Profit margin is a measure of the percentage of each euro of sales that results in net income
How do you calculate the profit margin?
Profit Margin= Net Income÷Net Sales
Whats the asset turnover?
Asset turnover measures how efficiently a company uses its assets to generate sales. The resulting number shows the euros of sales produced by each euro invested in assets. Unless Acid-Test Ratio = (Cash + Short-Term Investments + Accounts Receivable (net)) ÷Current Liabilities Accounts Receivable Turnover = Net Credit Sales ÷Average Net Accounts Receivable InventoryTurnover = Cost of Goods Sold÷Average InventoryProfit Margin= Net Income÷Net Sales factors are significant, we can use the beginning and ending balance of total assets to determine average total assets.
Whats the formula of asset turnover?
Asset Turnover = Net Sales÷Average Total Sales
Whats the formula of return on assets?
Return on Assets = Net Income÷Average Total Sales
Whats the return on ordinary shareholders equity?
Another widely used profitability ratio is return on ordinary shareholders’ equity. It measures profitability from the ordinary shareholders’ viewpoint. This ratio shows how many euros of net income the company earned for each euro invested by the owners.When a company has preference shares, we must deduct preference dividend requirements from net income to compute income available to ordinary shareholders. Similarly, we deduct the par value of preference shares (or call price, if applicable) from total equity to determine the amount of ordinary shareholders’ equity used in this ratio
Whats the formula of the return on shareholders equity?
Return on Ordinary Shareholder’s Equity = (Net Income –Preference Dividends) ÷Average Ordinary Shareholder’s
Whats the formula of earnings per share?
Earnings per Share = (Net Income –Preference Dividends) ÷Weighted-Average Ordinary Shares Outstanding
Whats the price earnings ratio?
The price-earnings (P-E) ratiois a widely used measure of the ratio of the market price of each ordinary share to the earnings per share. The price-earnings (P-E) ratio reflects investors’ assessments of a company’s future earnings.
