Chapter 4: Fundamental Concepts in Financial Management and Financial Forecasting Flashcards Preview

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Flashcards in Chapter 4: Fundamental Concepts in Financial Management and Financial Forecasting Deck (22):
1

What are the 4 ratios?

1. Liquidity Ratios
2. Asset Management ratios
3.Debt Management ratios
4. Profitability ratios
5. Market value ratios

2

What is a liquid asset?

- Easily converted to cash
- No need to affect asset price too much

3

What is liquidity ratio?

- Relationship of cash/ other current assets over current liabilities

4

What is current ratio?

- Current assets over current liabilities

5

What is quick ratio (acid test)?

- (Current assets - Inventories) over current liabilities

6

What is asset management ratio?

- How effective the firm manages assets

7

What is inventory turnover ratio?

- Sales over inventories

8

What is Day Sales Outstanding (DSO)?

- Receivables over average daily sales

9

What is fixed assets turnover ratio?

- Sales over net fixed assets

10

What is total assets turnover ratio?

- Sales over total assets

11

What are debt management ratios?

-How well firm's manage debt.

12

What is debt ratio?

- Total debt over total assets

13

What is times-interest-earned (TIE) ratio?

- EBIT over interest charged
- Firms' ability to pay back interest

14

What are profitability ratios?

-How equity, liquidity, asset management and debt affect operation results

15

What is operating margin?

- EBIT/Operating income over sales

16

What is net profit margin?

- Net income over sales

17

What is return on total investment ratio?

- Net income over total assets

18

What is basic earning power ratio (BEP)?

- Operating income/EBIT over total assets

19

What is return on common equity (ROE)?

- Net income over common equity

20

What is market value ratio?

- Relates stock price to earnings and book value per share.

21

What is Price/Earnings(P/E) ratio?

- Price of the share over its earnings

22

What is Market/Book ratio?

- Stock market price over book value