financial statement ratios Flashcards
(23 cards)
Acid Test
Cash and Near Cash / Current Liabilities
measures ability to meet current Debt
rule of thumb 1 to 1
Current Ratio
Current Assest / Current Liabilities
Another measure of ability to meet current obligations. rule of thumb is 2 to 1
Recievables Turnover
Sales / Recievables
Measures effectiveness of credit and collection policies.
Days Recievables
30 / Recievables Turnover
A way to see on average how long a recievable takes to collection.
Inventory Turnover
Cost of Goods Sold / Average Inventory
A measure of how well inventory is managed
Days Inventory
30 / Inventory turnover
Gross Margin Rate
Gross Margin / Sales
Net Profit Rate
Net Profit / Sales
An overall batting average
Return on Investment (ROI)
Net Profit / Net Worth
Profitability ratio
A high ROI means the investment gains compare favorably to investment cost
Return on Assests (ROA)
Net Profit / Total Assets
percentage shows how profitable a company’s assets are in generating revenue.
Quick Ratio
Current Assets - Inventory / Current Liabilities
A measure of liquidity that doesn’t include inventory
Cash ratio
Cash + Marketable Securities / Current Liabilities
A measure of illiquidity that excludes all assets except cash and cash equivalents
Debt Ratio
Total Debt / Total Assets
Debt-to-equity-ratio
Total Debt / Total Equity
Interest Coverage
EBIT/ Interest Charges
EBIT= Earnings before Interest and Taxes
Gross Profit Margin
Sales - Cost of Goods Sold / Sales
Measure of the gross profit earned on Sales
Return on Equity
Net Income after tax / Shareholder’s Equity
Dividend yield
Dividends per share/ Share Price
Payout Ratio
Dividends per share / Earnings per share
What is amortization
The process of devaluing intangible assets over time
What is accretion
Asset growth through addition or expansion
After tax return on stockholder’s equity
Net income after tax / average owner’s equity
Times interest earned
Income before interest and taxes/ interest expense
