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Financial > FAR 2.7 - Ratio Analysis > Flashcards

FAR 2.7 - Ratio Analysis Flashcards

1
Q

What are the 4 key financial ratio classifications?

A

Liquidity ratios
Activity ratios
Profitability ratios
Coverage ratios

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2
Q

Measures of a firm’s short term ability to pay maturing obligations

A

Liquidity ratios

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3
Q

Current ratio calculation:

A

Current assets / current liabilities

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4
Q

Quick ratio calculation:

A

Current assets - inventory / current liabilities

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5
Q

Should liquidity ratios be higher or lower?

A

Higher the ratio, Lower the risk

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6
Q

Measures how effectively an enterprise is using its assets:

A

Activity ratio

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7
Q

Should turnover ratios be higher or lower?

A

Higher the better

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8
Q

Accounts receivables turnover calculation:

A

Sales / Average AR

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9
Q

Days sales in AR calculation:

A

Ending AR / (sales / 365)

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10
Q

Inventory turnover calculation:

A

COGS / Average Inventory

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11
Q

Days in inventory calculation:

A

Ending inventory / (COGS / 365)

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12
Q

Accounts payable turnover calculation:

A

COGS / average AP

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13
Q

Days of payables outstanding calculation:

A

Ending AP / (COGS / 365)

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14
Q

Cash conversion cycle calculation:

A

Days sales in AR + Days in inventory - Days of payables outstanding

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15
Q

Asset turnover calculation:

A

Sales / average total assets

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16
Q

Measures of the success or failure of an enterprise for aa given time period:

A

Profitability ratios

17
Q

Should profitability ratios be higher or lower?

A

Higher than the standard

18
Q

Profit margin calculation:

A

Net income / sales

19
Q

Return on assets:

A

Net income / average total assets

20
Q

Return on equity calculation:

A

Net income / average total equity

21
Q

Return on sales calculation:

A

Income before interest income, interest expense, and taxes / sales

22
Q

Gross profit margin:

A

Sales - COGS / sales

23
Q

Operating cash flow ratio calculation:

A

Cash flow from operations / current liabilities

24
Q

Measure of security or protection for long-term creditors/investors:

A

Coverage ratios

25
Q

Debt to equity ratio calculation:

A

Total liabilities / total equity

26
Q

Total debt ratio calculation:

A

Total liabilities / total assets

27
Q

Equity multiplier calculation:

A

Total assets / total equity

28
Q

Times interest earned calculation:

A

Income before interest expense and taxes / interest expene

29
Q

Earnings per share calculation:

A

Income available to shareholders / WACO

30
Q

Price earnings ratio calculation:

A

Price per share / basic earnings per share

31
Q

Dividend payout calculation:

A

Cash dividend / net income

Financial (38 decks)

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