Topics 2: Financial Ratios Flashcards

1
Q

What are the two kinds of ratio analysis?

A

time series analysis

cross-sectional analysis

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2
Q

What are the types of financial ratios

A

liquidity
activity
leverage
profitability

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3
Q

What are the liquidity ratios

A

current ratio
quick, acid test, ratio
net working capital (not ratio)

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4
Q

What are the activity ratios

A

accounts receivable turnover
average collection period

inventory turnover
average age of inventory

average payment period

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5
Q

What are the debt ratios

A

debt ratio
long term debt to equity ratio
times interest earned

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6
Q

What are the types profitability ratios?

A

investment ratio

margin ratios

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7
Q

What are the margin ratios

A

gross profit margin
operating profit margin
net profit margin

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8
Q

What are the investment ratio

A

earnings per share

price/earnings ratio

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9
Q

What are the limitations of ratio

A
single ratio not sufficient
not dated to same point, distortion
unaudited, dubious figure
different accounting policies, distort
historical, economic conditions change
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