Flashcards in F7: Appendix Items Deck (28)
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1
Liquidity Ratios definition
Measures a firm's ST ability to pay maturing obligations
2
Activity Ratios definition
Measures how effectively an enterprise is using its assets
3
Profitability Ratios definition
Measures the success or failure of an enterprise for a given time period
4
LT Debt Paying Ability Ratios (coverage ratios) defintion
Measures security for long-term creditors/investors
5
4 Types of Liquidity Ratios
1- Working Capital
2- Current Ratio (working capital ratio)
3- Acid-test Ratio
4- Cash Ratio
6
Working Capital formula
CA - CL
7
Current Ratio (working capital ratio)
CA / CL
8
Acid-test Ratio
(Cash equivalents + marketable securities + net receivables) / CL
9
Cash Ratio
(Cash equivalents + marketable securities) / CL
10
7 Types of Activity Ratios
1- Accounts Receivable Turnover
2- Accounts Receivable Turnover in Days
3- Inventory Turnover
4- Inventory Turnover in Days
5- Operating Cycle
6- Working Capital Turnover
7- Total Asset Turnover
11
Accounts Receivable Turnover
(Net credit sales) / (average net receivables)
12
Accounts Receivable Turnover in Days
(Average net receivables) / (net credit sales/365)
OR
(365 days) / Receivable turnover
13
Inventory Turnover
(COGS) / (Average Inventory)
14
Inventory Turnover in Days
(Average Inventory) / (COGS/365)
OR
(365 days) / Inventory turnover
15
Operating Cycle
AR turnover in days + Inventory turnover in days
16
Working Capital Turnover
(Sales) / (Average working capital)
17
Total Asset Turnover
(net sales) / (average total assets)
18
5 Types of Profitability Ratios
1- Net Profit Margin
2- Return on Total Assets
3- DuPont Return on Assets
4- Return on Investment
5- Return on Common Equity
19
Net Profit Margin
(NI) / (Net Sales)
20
Return on Total Assets
(NI) / (Average total assets)
21
DuPont Return on Assets
Net Profit Margin X Total Asset Turnover
OR
(NI/Net Sales) X (Net Sales/Avg Total Assets)
22
Return on Investment
[NI + Interest Expense times (1-T)] / Average of LT Liabilities and equity
23
Return on Common Equity
(NI - Preferred Dividends) / Average common equity
24
4 Types of LT Debt-Paying Ratios
1- Debt/Equity
2- Debt Ratio
3- Times Interest Earned
4- Operating Cash Flow/ Total Debt
25
Debt/Equity
(Total Liabilities) / (Common SHE)
26
Debt Ratio
(Total Liabilities) / (Total Assets)
27
Times Interest Earned
(Recurring income before taxes and interest) / Interest
28
