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11 Cards in this Set
- Front
- Back
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CA - CL |
Working Capital want a positive number |
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CA / CL |
Current ratio 2:1 is good, 0.7:1 can't cover Short-Term Debts even once, 5:1 isn't good (not using cash efficiently) |
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(CASH + A/R + Marketable securities)/CL |
Quick Ratio 1:1 is good |
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COGS / Avg inventory* |
Merchandise turnover Consider type of products and compare against the rest of the industry, higher turnover is good
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365 days / Merchandise Turnover |
Days to sell Avg inventory Depends on the type of industry. (Butcher meat needs to sell quick, car dealers sell cars slower) |
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Net(Credit) Sales*/Average A/R** |
A/R Turnover Must compare to the rest of the industry
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365 Days / A/R Turnover |
A/R collection period If terms of sale are net 30, up to 45 days are ok. |
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OE / Total Assets x 100% |
Equity ratio Lenders and creditors want to see a high one (preferably > 50%) |
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Total debt / Total Assets x 100% |
Debt ratio Lenders and creditors want to see a lower value , owners are ok with higher debt if there is a lower interest rate. |
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NI/ Net Sales x 100% |
Rate of return on net sales The higher the better, compare to similar industries |
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NI/ AvgOE*x 100% |
Rate of return on average owner's equity The higher is better, although need to compare to other industries |
