Ratios Flashcards
Current Ratio
current asssets/current liabilities - liquidity ratio
>1 = good
<1 = concerning
Quick Ratio
(Current assets - inventories)/current liabilities - liquidity
>.8=good
Cash Ratio
(Cash+martketable securities)/Current liabilities - liquidity
Only matters is Current ratio and quick ratio are bad
Debt to Equity Ratio
Total debt/total equity = (short term debt + long term debt)/total equity - solvency
<= 1 good
<=.5 better
> 1 requires closer look
Debt to Total Capital
Total Debt/(total equity + total debt) - solvency
<= .5 good
<= .25 better
> .5 closer look/ levered up
Interest Coverage Ratio or Time interest earned
EBIT (operating income) / interest expense - solvency
how well do you have your interest payments covered
>= 10 good
higher is better
Cash Coverage Ratio
(EBIT + Depreciation and Amortization)/interest expense - solvency
if Times interest earned is bad, CCR might explain it.
>= 10 good
< 10 bad
Receivables Turnover
Sales/accounts receivable- asset management
how many times of year do you get paid
Days Sales Outstanding
365/receivables turnover
how many days does it take to get paid
Inventory Turnover
COGS/inventory
how many times of year do you turnover inventory
Days of Inventory on Hand
365/inventory turnover - how long is your inventory sitting on your shelves
Payables Turnover
COGS/Accounts Payable - how many times of year do you pay the bills
Days Payable
365/Payables Turnover - how long does it take you to pay your bills
Total Asset Turnover
Revenue/total assets
asset managemnet
>= 1 ideal
industry dependent
Leverage Ratio
total assets/total equity
- solvency
how leveraged is your firm
