ratios

Question 1

current ratios

Answer 1

liquidity measure
current assets/current liabilities

Question 2

price - earnings ratio

Answer 2

market value price/company’s earnings per share
one profitability ratio

Question 3

solvency ratio

Answer 3

determines long term survivability
total liabilities/total assets = %

Question 4

Basic earnings per share (EPS) ratio

Answer 4

income to common shareholders/#of common shares
one profitability rstio

Question 5

gross profit margin

Answer 5

net sales - cost of goods sold

Question 6

profit margin

Answer 6

how much sales rev exceeds cost
(gross profit/total revenue)x100

Question 7

dividend yield ratio

Answer 7

dividend per share/share price

Question 8

profitability ratio

Answer 8

operating success for period
NOT CALCULATED
P/E or EPS

Question 9

working capital equation

Answer 9

CA-CL

Question 10

gross profit margin equation

Answer 10

gross profit / sales

Question 11

profit margin equation

Answer 11

net income/sales

Question 12

gross profit equation

Answer 12

sales - COGS

Question 13

inventory turnover ratio equation

Answer 13

COGS/average inventory value
higher better
stuff being sold faster

Question 14

days in inventory ratio equation

Answer 14

365/inventory turnover
lower better

Question 15

receivable turnover ratio equation

Answer 15

credit sales/ avg gross AR
higher better, more liquid

Question 16

average collection period ratio equation

Answer 16

365 days/receivables turnover

Question 17

return on assets equation

Answer 17

net income/ avg total assets

Question 18

asset turnover ratio equation

Answer 18

sales/avg total assets

Question 19

gross profit margin what it measures and desired result

Answer 19

difference between selling price and COGS
higher better

Question 20

profit margin what it measures and desired result

Answer 20

profit generated per dollar of sales
higher better

Question 21

asset turnover what it measures and desired result

Answer 21

how efficiently assets are used to generate sales
higher better

Question 22

return on assets what it measures and desired result

Answer 22

overall profitability of assets
higher better

Question 23

return on common SE what it measures and desired result

Answer 23

profitability of common share holders investments
higher better

Question 24

earnings per share what it measures and desired result

Answer 24

amount of profit earned on each share
higher better

Question 25

price - earnings ratio what it measures and desired result

Answer 25

market price per share vs earnings per share higher better

Question 26

payout ratio what it measures and desired result

Answer 26

% of profit distributed as dividends higher better from investor pov

Question 27

payout ratio what it measures and desired result

Answer 27

% of profit distributed as dividends higher better

Question 28

dividend yield what it measures and desired result

Answer 28

dividends per share vs purchase price of shares higher better

Question 29

return on common SE equation

Answer 29

(net income - preferred divis)/avg common SE equity

Question 30

return on common SE what it measures and desired result

Answer 30

how much common investors receive vs original investment higher better