Chapterss Flashcards
(19 cards)
Income Statement
Measures the profitability of a firm over a period of time
Gross Profit
Sales (revenues) minus COGS (direct costs related to sale). It May contain some fixed costs but excludes overheads
Contribution Margin
Sales minus variable costs
Operating Profit (Earnings before interests and taxes)
A measure of how efficient management is in generating revenues and controlling expenses. It’s calculated by subtracting selling and admin and fixed costs from CM.
Earnings (net income or loss)
Operating profit is adjusted for revenues and not related to operational matters resulting in net earnings.
Financial ratios
weigh and evaluate operating performance, judge compartive performance between firms, determines relative as opposite absolute performance.
Profitability ratios
Profit margin, gross profit margin, return on assets (investment), and return on equity (common shareholders). Measures profit
Asset Utilization Ratios
Receivables turnover, average collection period (days sales outstanding), inventory turnover, inventory holding period, accounts payable turnover, acounts payable period, capital asset turnover, and total asset turnover
Liquidity Raios
Current ratio, quick ratio (acid test)
Debt utlization ratios
debt to total assets, time interest earned, fixed charge coverage
Profit Margin
=net income/sales
Gross Profit Margin
Gross Profi/Sales
Return on Assets (ROA) investment (ROI)
=net income/total assets
Return on Asssets
=(net income/sale) * (sales/total assets)
Return on Equity (ROE)
Net Income/Shareholders equity
Equity Multiplier
Total Assets/equity
Return on Equity (ROE)=
ROA X equity multiplier
ROA (investmet
profit margin x asset turnover
Trend analysis
an analysis of performance that is made over a number of years to ascertain significant patterns
