Flashcards in Evaluating Financial Statements Deck (30)

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1

## List the formula for times interest earned.

### (Net Income + Interest Expense + Income Tax Expense) / Interest Expense.

2

## List the formula for number of days' supply in inventory.

### 365/ Inventory Turnover.

3

## What are the general types of ratios?

### Liquidity/Solvency; Operational Activity; Profitability; Equity/Investment Leverage.

4

## What do operational activity ratios measure?

### They measure the efficiency with which a firm carries out its operating activities.

5

## List the formula for working capital.

### Current Assets - Current Liabilities.

6

## List the formula for determining Operating Cycle Length.

### Days' Sales in Accounts Receivable + Days' Supply in Inventory.

7

## List the formula for the Acid Test or Quick Ratio.

### (Cash + Net Receivables + Marketable Securities) / Current Liabilities.

8

## List the Accounts Receivable Turnover ratio formula.

### Net Credit Sales / Average Net Accounts Receivable.

9

## List the working capital ratio formula.

### Current Assets / Current Liabilities.

10

## What do liquidity (or solvency) ratios measure?

### Measure the ability of the firm to pay its debts as they come due.

11

## List the formula for Number of Days' Sales in Accounts Receivable (AR).

### 365/ AR Turnover.

12

## List the cash availability or interval ratio formula.

### (Cash + Net Receivables + Marketable Securities) / Average Daily Cash Expenditures.

13

## List the formula for times preferred dividend.

### Net Income / Annual Preferred Dividend Obligation.

14

## List the formula for inventory turnover.

### Cost of Goods Sold (COGS) / Average Inventory.

15

## What is financial statement ratio analysis?

### The development of quantitative relationships between various elements of a firm's financial statements.

16

## List the total common stock dividend payout rate formula.

### Cash Dividends to Common Shareholders / Net Income to Common Shareholders.

17

## List the book value per preferred share ratio formula.

### Preferred Shareholders' Equity (including dividends in arrears) / Number of Outstanding Preferred Stocks.

18

## What do equity/investment leverage ratios measure?

### Measure relative sources of equity and equity value.

19

## List the debt to equity ratio formula.

### Total Liabilities / Total Shareholders' Equity.

20

## List the price to earnings ratio formula.

### Market Price for a Common Share / Earnings Per Share (EPS).

21

## List the profit margin formula.

### Net Income/Net Sales.

22

## List the common stock yield formula.

### Dividend per Common Share / Market Price per Common Share.

23

## List the return on common stockholders' equity formula.

### (Net Income-Current Period Preferred Dividend Obligation) / Average Common Stockholders' Equity.

24

## List the debt ratio formula.

### Total Liabilities / Total Assets.

25

## List the per share common stock dividend pay out rate formula.

### Cash Dividends per Common Share / Earnings Per Share (EPS).

26

## List the book value per common stock ratio formula.

### Common Shareholders' Equity / Number of Outstanding Common Shares.

27

## List the return on total assets formula.

### (Net Income + Interest Expense (net of tax)) / Average Total Assets.

28

## What do profitability ratios measure?

### Aspects of a firm's operating (income/loss) results on a relative basis.

29

## List the return on owner's equity formula.

### Net Income / Average Stockholders' Equity.

30