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Financial Analysis and Reporting > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

Financial Ratios

A

Profitability ratio
liquidity ratio
solvency ratio

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2
Q

relate to the companys performance in the current period

A

profitability ratios

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3
Q

it shows the companys ability to generate income

A

profitability ratio

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4
Q

relate to the companys short term survival

A

liquidity ratios

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5
Q

it shows the companys ability to use current assets to repay liabilities as they become due

A

liquidity ratios

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6
Q

it measures the short-term ability of the enterprise to pay its obligation and to meet unexpected needs for cash

A

liquidity ratios

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7
Q

relate to the companys long-run survival

A

solvency ratios

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8
Q

it shows the companys ability to repay lenders when debt matures and to make the required interest payments prior to the date of maturity

A

solvency ratio

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9
Q

Ratios in Profitability

A

Net profit margin or return on sales
Return on total assets
Return on Equity
Gross profit percentage
asset turnover
fixed asset turnover
earnings per share
price/earnings ratio (P/E)
Dividend yield
dividend pay-out

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10
Q

represents the percentage of revenue that ultimatelt makes it into net income, after deducting expense

A

net profit margin or return on sales

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11
Q

it determines the amount of income by owners

A

net profit margin or return on sales

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12
Q

efficiency with which assets are used to. operate a business

A

return on total assets

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13
Q

it compares the amount of net income to average stockholders equity

A

return on equity

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14
Q

it reports the net amount earned during the period as a percentage of each peso contributed by stockholders and retained in the business

A

return on equity

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15
Q

it indicates how much profit was made, on average, on each peso of sales after deducting the cost of goods sols

A

gross profit percentage

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16
Q

it indicates the amount of sales revenue generated for each peso invested in assets during the period

A

asset turnover

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17
Q

it indicates how much revenue the company generates for each peso invested in fixed assets

A

fixed asset turnover

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18
Q

it indicates the amount of earnings generated for each share of outstanding common stock

A

earnings per share

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19
Q

it indicates the number of pesos required to buy 1.00 or earnings

A

Price/Earnings Ratio

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20
Q

it measures the rate of return in the investors common stock investments

A

dividend yield

21
Q

it indicates the proportion of earnings distributed as dividends

A

dividend pay-out

22
Q

Ratios in Liquidity

A

Current ratio
quick ratio
cash ratio
receivables turnover
average age of receivables or days sales outstanding
inventory turnover
average age of inventory or days in inventory
raw materials inventory turnover
goods in process turnover
days in operating cycle
trade payables turnover
average age of trade payables or days in trade payables
cash conversion cycle
current asset turnover

23
Q

it measures the companys ability to pay its current liabilities

A

current ratio

24
Q

it is a measure of adequacy of working capital

A

current ratio

25
Q

it is the primary test of solvency to meet current obligations from current assets

A

current ratio

26
Q

what are quick assets

A

cash
short term investments
accounts receivable

27
Q

this ratio is a much more stringent test of short term liquidity

A

quick ratio

28
Q

it measures the number of times that the current liabilities could be paid with the available cash and near cash assets

A

quick ratio

29
Q

it measures the number of times that the current liabilities could be paid using cash and marketable securities

A

cash ratio

30
Q

It is the time required to complete one collection cycle from the time receivables are recorded, then collected, to the time new receivables are recorded again

A

receivables turnover

31
Q

It indicates the average number of days during which the company must wait before receivables are collected

A

Average age of receivables or days sales outstanding

32
Q

It indicates how frequently inventory is bought and sold during the year

A

Inventory turnover

33
Q

It measures the number of times that the inventory is replaced during the period

A

Inventory turnover

34
Q

It shows the average number of days needed to solve each purchase of inventory

A

Average age of inventory or days in inventory

35
Q

It indicates how frequently raw materials are bought and used in production

A

Raw materials inventory turnover

36
Q

It indicates how frequently goods in process are continued and finished

A

Goods in process turnover

37
Q

Shows how long the operating cycle of the company is

A

Days in operating cycle

38
Q

It is the time needed to turn cash into inventory, inventory into receivables, and receivables back into cash

A

? Days in operating cycle

39
Q

It indicates the time required to complete one payment cycle from the time the payables are recorded then paid to the time new payables are recorded again

A

Trade payables turnover

40
Q

It indicates the length of time during which payables remain unpaid

A

Average age of trade payables or days in trade payables

41
Q

It shows the time from when the cash is used in operations to the time it is converted into cash again

A

Cash conversion cycle

42
Q

It measures the movement and utilization of current assets to meet operating requirement

A

Current asset turnover

43
Q

Ratios in Solvency

A

debt to assets
times interest earned
debt to equity ratio
debt ratio
equity ratio

44
Q

It indicates the proportion of total assets that creditors finance

A

Debt to assets

45
Q

It indicates how many times the company’s interest expense was covered by its net operating income

A

Times interest earned

46
Q

It determines the extent to which operations cover interest expense

A

Times interest earned

47
Q

Proportion of assets provided by creditors compared to that provided by owners

A

Debt to equity ratio

48
Q

Proportion of total assets provided by creditors

A

Debt ratio

49
Q

Proportion of total assets provided by owners

A

Equity ratio

Financial Analysis and Reporting (7 decks)

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