Accounting Flashcards
(34 cards)
Cash ratio
Short-term liquidity
= cash & cash equivalents /
current liabilities
ability to meet current liability with „cash only“ (strictest)
Quick ratio
Short-term liquidity
= (Current assets - inventories) /
current liabilities
ability to meet short-term liabilities with more liquid assets (medium strict)
Current Ratio
Short-term liquidity
= current assets /
current liabilities
ability to meet short-term liabilities with assets that can be turned into cash rather quickly
Current Assets
- cash & cash equivalents
- accounts receivable (AR)
- inventory
- marketable securities (e.g. stocks, bonds)
Current liabilities
- accounts payable
- short-term debt & current portion of long-term debt (<1 year)
- unearned revenue („Vorauszahlung“ durch Kunden)
- accrued expenses (e.g. salaries not yet payed)
Coverage ratio A
Long-term liquidity
= equity / non-current assets
How much of the long-term (fixed) assets are financed by shareholder equity rather than debt
Coverage ratio B
Long-term liquidity
= equity + long-term debt/ non-current assets
How much of the long-term (fixed) assets are financed by equity and long-term debt rather than short-term debt
Coverage ratio C
Long-term liquidity
= equity + long-term debt / non-current assets + inventories
How much of the long-term (fixed) assets and inventory (important asset in manufacturing/retail!) are financed by equity and long-term debt
Asset intensity
Efficiency / Intensity
= non-current assets / total assets
how much of the assets is tied up in fixed assets —> less felixible, common e.g. in manufacturing
Turnover intensity
Efficiency / Intensity
= current assets / total assets
how much of the assets lies in AR, cash & inventories —> more felixible & liquid, but too high = inefficient asset allocation
Receivables turnover ratio
Efficiency / Turnover
= Net sales / average accounts receivable
How often AR are turned into cash in a given period (= period of net sales, usually 1y)
!!! in days (DSO = days sales outstanding) = 365 / AR-turnover ratio
Days sales outstanding
Efficiency / Turnover
= AR x 365 / net sales OR BETTER net credit sales (nur sales, die nicht direkt bezahlt werden)
auch: = 365 / AR-turnover ratio
Inventory turnover ratio
Efficiency / Turnover
= COGS / average inventories
How many times is the inventory sold/replaced over a given period; how effieciently is inventory managed
Days inventory outstanding (DIO)
Efficiency / Turnover
= average inventories x 365 / COGS
auch: = 365 / Inventory turnover ratio
Payables turnover ratio
Efficiency / Turnover
= COGS / average accounts payable (AP)
How often AP are “completely” payed in a given period (= period of net sales, usually 1y)
Days payables outstanding (DPO)
Efficiency / Turnover
= average accounts payable x 365 / COGS
auch: = 365 / AP turnover ratio
Equity ratio
Financial stability
= equity / total assets
How much of the companies assets are financed by equity rather than debt; more attractive to lenders/investors
Debt ratio
Financial stability
= financial debt / (financial debt + equity)
How much of the assets is financed by debt; more risky for investors/lenders
Debt-to-equity ratio
Financial stability
= financial debt / equity
also: gearing ratio, leverage ratio;
how much of the company is financed by debt in relation to equity; risk evaluation fir investors/lenders
Interest coverage ratio
Debt coverage
= operating income (EBIT) / interest expense
How well can the company meet its interest obligations to debt holders
Debt service coverage ratio
Debt coverage
= operating income (EBIT) / total debt service (principal repayments, usually due in the next year + interest paxments)
How well can the company meet its total current obligations to debt holders
EBIT margin
Profitabilty margins
= EBIT / total revenue
Measures the operating profitability (before interest and taxes)
Cash flow margin
Profitabilty margins
= operating cash flow (OCF, cash generated by regular business operations) / total revenue
How much cash is generated from sales, also indicates liquidity
ROE (Return on equity)
Return metrics
= net income (PAT) / shareholders’ equity
How efficiently does the company generate profit from shareholders equity; important for shareholders; > 20% is very good, less than 10% is not so good.
