Ratios Flashcards

1
Q

What do Liquidity Ratios measure?

A

measures of a firm’s short term ability to pay maturing obligations

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2
Q

What do Activity Ratios measure?

A

measures how effectively an enterprise is using its assets

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3
Q

What do Profitability Ratios measure?

A

the financial performance of an enterprise for a given period

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4
Q

What do Investor Ratios measure?

A

measures that are of interest to investors

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5
Q

What do long-term debt-paying ability ratios (or coverage ratios) measure?

A

measures of security for long-term creditors/investors

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6
Q

Inventory turnover

A

Cost of Goods Sold / Average Inventory

measure how effectively an entity employs its resources

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7
Q

Return on Assets

A

Net Income / Average Total Assets

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8
Q

Accounts Receivable Turnover

A

Net Credit Sales / Average Net Receivables

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9
Q

Average number of days sales in inventory is defined as?

A

365 days per year divided by the inventory turnover.

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10
Q

Liquidity ratios and coverage ratios focus on?

A

Balance sheet account balances

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11
Q

Income statement information is primarily used for?

A

Profitability analysis

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12
Q

Current Ratio (working capital ratio)

A

Current Assets / Current Liabilities

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13
Q

Working Capital?

A

Current Assets - Current Liabilities

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14
Q

Acid-test Ratio

A

Cash equivalents + Marketable Securities + Accounts Receivable / Current Liabilites

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15
Q

Accounts Receivable Turnover in Days

A

365 / Receivable Turnover (net credit sales/avg net receivables)

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16
Q

Return on Assets

A

Net Income / Average total assets

17
Q

Return on Equity

A

Net Income - Preferred Dividends / Average Common Equity

18
Q

Return on Investment

A

Net Income + Interest Expense (1 - tax rate) / Average (long term liabilities + equity)

19
Q

Net Operating Margin (% percentage)

A

Net Operating Income / Net Sales or Operating Profit/Revenue

20
Q

Net Profit Margin

A

Net Income / Net Sales

21
Q

Gross (Profit) Margin Percentage

A

Sales - COGS / net sales

22
Q

Debt to Equity

A

Total Liabilities / Common Stockholders Equity

23
Q

How to calculate upper deviation rate for ATTRIBUTE SAMPLING?

A

Sample Deviation Rate + Allowance for Sampling Risk = Upper Deviation Rate

24
Q

Mean - Per - Unit Estimation for VARIABLE sampling?

A

Average Sample Value X Number of Items in Population = Point Estimate

uses average value of items in sample to estimate the true population value

25
Ratio Estimation for VARIABLE sampling?
Selected Items True Value / Selected Items Book Value X Population Book Value = Point Estimate uses the ratio of audited (correct) values of items to their book value to estimate true population value, Ratio estimation is most effective if there is a correlation between book values and audit amount
26
Difference Estimation for VARIABLE sampling?
Step 1: Calculate Projected Error = ((BV of Sample - Audit Val of Sample) / # of items audited)*population items Step 2: Calculate Point Estimate = Total BV of Population - Projected Error uses the average difference between audited (correct) values of items and their book values to estimate true population value
27
Sampling Interval is determined how PPS (probability proportional to size)?
Sampling Interval = Tolerable misstatement / Reliability factor (from table)
28
Sample size is determined PPS?
Sample Size = Recorded amount of the population / sampling interval (from above)