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Flashcards in Finanical ratios Deck (9)
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1
Q

Current ratio

A

CA / CL
should greater than 1
if low, then spells trouble and indicates short term solvency problem

2
Q

cash ratio

A

cash + market securities / cl

too much cash is not good becuase means executives suit does not know what to do with money

3
Q

inventory turnover

A

sales / inventory

multiple

4
Q

days sales outstanding

A

AR / (Annual sales/Sales)
is its high, then comp won’t get payments, so eps is high
cash is low bring could bring comp down

5
Q

how to fix high days sales outstanding

A

sell the ar
relook your credit terms, it may be too linent
give a discount as incentive
low prices than competitor

6
Q

fixed asset turnover

A

sales/net fixed assets

multiple

7
Q

net fixed assets

A

assets - depr

8
Q

which has higher stock price old company or new company??

A

new comp because more assets that are new and new products, so larger net fixed assets with no depr yet so fixed asset turnover is lower.
good asset means more productivity greater margins and competitive pricing

9
Q

TATO

A

SALES / total assets

higher the better