Financial Statement Analysis Flashcards
debt-to-equity ratio
total liabilities divided by total equity
current ratio
current asset divided by current liabilities
Accounts receivable turnover
credit sales divided by average accounts receivable
inventory turnover
cost of goods sold (cost of sale) divided by average inventory
receivables turnover ratio
sales divided by net average receivables
minus allowance for doubtful accounts
average total assets
the net credit sales divided by the total assets turnover
Net credit sales
calculated by multiplying the average receivables by the receivables turnover
average collection period for its accounts receivable
first calculate the receivables turnover, which is calculated by dividing the net credit sales by the average receivables
The number of days’ sales in average receivables is then calculated as 360/receivables turnover
operating cycle
the average days to collect accounts receivable
+
the average days sales in inventory
Return on assets
dividing net income by average total assets
number of days’ sales in average inventories
- what is total working days in year
- take cost of sales divide by number of days
- find average inventory
- number of days’ sales in inventory is (2)/(3)
Average days sales’ in inventory
dividing 365 days by inventory turnover
or by dividing average inventory by the average inventory sold per day.
average days required to collect accounts receivable
average accounts receivable divided by average sales per day
avg sales per day = $$ / 365
defensive interval ratio
measures the length of time a company can continue to pay its bills using only its liquid current assets, assesses liquidity
return on stockholders’ equity
measures profitability, not liquidity.
