Flashcards in F7: Appendix Items Deck (28):

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