ratio stuff terms Flashcards
Accounts payable:
Amounts the firm owes for credit purchases due within a year. This account is the liability counterpart of accounts receivable
Notes payable:
Short-term loans from banks, suppliers, or others that must be repaid within a year. For example, Delicious Desserts has a six-month, $15,000 loan from its bank that is a note payable.
Accrued expenses:
Expenses, typically for wages and taxes, that have accumulated and must be paid at a specified future date within the year although the firm has not received a bill.
Income taxes payable:
Taxes owed for the current operating period but not yet paid. Taxes are often shown separately when they are a large amount.
Current portion of long-term debt
Any repayment on long-term debt due within the year. Delicious Desserts is scheduled to repay $5,000 on its equipment loan in the coming year
Debt ratios
measure the degree and effect of the firm’s use of borrowed funds (debt) to finance its operations.
Activity ratios
measure how well a firm uses its assets
Earnings per share (EPS)
is the ratio of net profit to the number of shares of common stock outstanding.
.Profitability ratios
measure how well the firm is using its resources to generate profit and how efficiently it is being managed
The ratio of net profit to net sales is the
net profit margin,
Net working capital,
though not really a ratio, is often used to measure a firm’s overall liquidity.
Theacid-test (quick) ratio
is like the current ratio except that it excludes inventory, which is the least-liquid current asset.
Thecurrent ratio
is the ratio of total current assets to total current liabilities
Liquidity ratios
measure the firm’s ability to pay its short-term debts as they come due.
