FS Analysis Flashcards
It shows changes of corresponding FS items over a period of time
Horizontal Analysis
It is the process of comparing figures in the FS of a single period
Vertical Analysis
It measures an entity’s ability to meet short-term obligations and provides insights on present cash solvency
Liquidity Ratios
It measures an entity’s long-term financial viability. It is also called ‘leverage ratios’
Solvency Ratios
It measures an entity’s ability to use its assets and manage its liabilities effectively in the current period
Activity Ratios
These are used to determine how well an entity can generate profits from its operations
Profitability Ratios
These are used to help potential Investors make equity investment decisions using trends in earnings, dividends and stock prices
Market Value Ratios
Net Working Capital Formula
Current Assets less Current Liabilities
Current Ratio Formula
Current Assets / Current Liabilities
Quick Ratio Formula
Quick Assets / Current Liabilities
Note: Quick Assets exclude inventories
Debt Ratio Formula
Total Liabilities / Total Assets
Equity Ratio Formula
Total Equity / Total Assets
Debt-Equity Ratio Formula
Total Liabilities / Total Equity
Equity Multiplier Formula
1 / Equity Ratio
Note: May be computed also as
Assets / Equity
Times Interest Earned Formula
EBIT / Interest Payments
Inventory Turnover Formula
COGS / Ave. Inventory
Receivable Turnover Formula
Net Cr. Sales / Ave. Receivables
Payable Turnover Formula
Net Cr. Purchases / Ave. Payable
Asset Turnover Formula
Sales / Ave. Total Assets
Fixed Asset Turnover Formula
Sales / Ave. Fixed Assets
Age of Inventory Formula
360 days / Inventory Turnover
Age of Receivables Formula
360 days / Receivables Turnover
Age of Payable Formula
360 days / Payable Turnover
Normal Operating Cycle Formula
Age of Inventory + Age of Receivables
