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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

Operating Cash Flow/ Total Debt

(Operating cash flow) / Total Debt