Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/56

Click to flip

56 Cards in this Set

  • Front
  • Back
  • 3rd side (hint)
Return on Sales
Net Income / Sales
Return on Equity
Net Income / Stockholder's Equity ??
Stockholders' equity =
Return on Sales x Asset Turnover x Assets-to-equity ratio
Asset Turnover
Sales / Total Assets
Assets-to-equity Ratio
Total Assets / Stockholders' Equity
Current Ratio
Total Assets / Total Liability
Total Assets
What is assigned 100% in vertical analysis for the balance sheet
None
Net Sales
What is assigned 100% in vertical analysis for the income statement
None
Liquidity
Company’s ability to convert noncash assets into cash or to obtain cash in order to meet current liabilities; Short-term (1 yr or less); Essential to carrying out of business acitivity
None
What is the Working Capital formula?
Current Assets – Current Liabilities
What is Working capital used for?
Safety cushion to creditors; a greater balance is required when the entity has difficulty borrowing on short notice
What is the Current Ratio?
Current Assets / Current Liabilities
What Current Ratio used for?
Used to measure the ability of an enterprise to meet its current liabilities out of current assets
None
What is the Quick (Acid-Test) Ratio?
(Cash + Securities + Accounts Receivable) – Inventory / Current Liabilities
What does the Quick Ratio do?
A stringent test of liquidity; Does not include Inventory
What is the Accounts Receivable Turnover?
Net Credit Sales (or Total Sales) / Average Accounts Receivable
Avg Accts Receivable/Avg Daily Sales
Average Collection period
(Beginning Accts Rec + Ending Accts Rec)/ 2
Avg Accounts Receivable
Ratio that gives the number of times accts receivable are collected during the year
Accounts Receivable Turnover
What does it mean when there is a decline in inventory turnover?
Stocking of more goods
When is it not a concern if there is a decline in A/R turnover rate?
If there was an introduction of a new product line in which the advertising effects were not felt yet
None
What is this ratio for? 365 days / Turnover rate
Collection period: The number of days inventory is held
What do you do with the collection period?
This indicates the length of time needed to buy
What is the operating cycle?
the number of days it takes to convert inventory into cash
What is solvency?
the entity’s ability to meet its long-term obligations as they become due
Liabilities / Equity
Debt to Equity
Liabilities / Total Assets
Debt to Assets
Assets – Liabilities
Equity
What ratio is the significant measure of solvency?
Stockholders’ Equity / Total Liabilities
How do you figure the stockholders’ equity?
In the balance sheet
What is the formula for the operating cycle?
Number of days inventory is held + Number of days receivables are held
Why is the Stockholders’ equity compared to total liabilities important?
this is a significant measure of solvency since a high degree of debt in the capital structure may make it difficult for the company to meet interest charges and principal at maturity.
What do you get if you have a high debt position?
there is a high degree of debt in the capital structure may make it difficult for the company to meet interest charges and principal at maturity – AND the risk of running out of cash – AND – Less financial flexibility in the sense that it will be difficult to get loans in a crunch.
Net Income + Interest Expense (L-T) / Average Assets
Return on Assets (ROA)
Net Income + Interest Expense (L-T) / Sales
Profit Margin on Assets
Sales / Assets
Asset Turnover
Asset Turnover x Profit Margin
Return on Assets (ROA)
Profitability x Efficiency x Leverage
Return on Equity (ROE)
Return on Sales x Asset Turnover x Assets-to-Equity Ratio
Return on Equity (ROE)
Net Income/Sales x Sales/Assets x Assets/Equity
Return on Equity (ROE)
None
Net Income / Average Equity
Return on Equity (ROE)
Avg Assets / Avg Equity
Financial Leverage
Net Income – Pref Div / Net Income + Interest Expense (L-T)
Common Earning Leverage
How do you convert from a yearly number to a daily number?
365 / yearly number
Cost of Goods Sold / Avg Inventory
Inventory
How do you get an average number?
(Beginning of year # + End of year #) / 2
Sales / Avg Fixed Assets (L-T)
Fixed Assets
365 / Fixed Assets
how often in days there is a turnover in long-term assets
None
Earnings before Interest Expense / Interest Expense
Earnings Coverage Ratio
Net Income / Sales
Return on Sales
Sales / Total Assets
Asset Turnover
Total Assets / Stockholders’ equity
Assets-to-equity ratio
What is the purpose of the Form 20-F?
a form that explains in detail the differences between a company’s net income computed applying its home country’s accounting principles and net income computed applying U.S. GAAP.
Rauh Corp had a current ratio of 2.0 at the end of 2007. Current assets and current liabilities increased by equal amounts during 2008. The effects on net working capital and on the current ratio
respectively
From the standpoint of the stockholders of a company
the ratio that measures the overall performance of a company would be calculated using what?
Rauh Corp had a current ratio of 2.0 at the end of 2007. Current assets and current liabilities increased by equal amounts during 2008. The effects on net working capital and on the current ratio respectively were:
No Effect
No Effect - Increase – Decrease
Rauh Corp had a current ratio of 2.0 at the end of 2007. Current assets and current liabilities increased by equal amounts during 2008. The effects on net working capital and on the current ratio respectively were:
No Effect
No Effect - Increase – Decrease