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12 Cards in this Set
- Front
- Back
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Liquidity ratios
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how fast an asset can be converted to cash; measure a company’s ability to turn assets into cash to pay its short-term debts
Current Ratio= (Current assets / Current liabilities) Acid-Test Ratio= (Cash + Accounts Receivable + Marketable Securities) / (Current Liabilities) |
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Current Ratio
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Current Ratio= (Current assets / Current liabilities)
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Acid-Test Ratio
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Acid-Test Ratio= (Cash + Accounts Receivable + Marketable Securities) / (Current Liabilities)
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Leverage (Debt) Ratios
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Leverage (Debt) Ratios: measures the degree to which a firm relies on borrowed funds in its operations
Debt to owner’s equity ratio= (Total liabilities)/ (Owner’s equity) |
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Debt to owners' equity ratio
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Debt to owner’s equity ratio= (Total liabilities)/ (Owner’s equity)
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Profitability (Performane) Raios
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Profitability (Performance) Ratios: measure how effectively a firm is using its various resources to achieve profits
Basic Earnings Per Share = (Net Income after taxes) / (Number of common stock shares outstanding) Return on Sales= (Net Income) / (Net Sales) Return on Equity = (Net income after tax) / (Total owners’ equity) |
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Basic Earnings Per Share
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Basic Earnings Per Share = (Net Income after taxes) / (Number of common stock shares outstanding)
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Return on Sales
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(Net Income) / (Net Sales)
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Return on Equity
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(Net Income after tax) / (Total owners' equity)
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Activity Ratios
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Activity Ratios: measure the effectiveness of a firm’s management in using the assets that are available
Inventory Turnover= (COGS) / (Average inventory) |
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Inventory Turnover
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(COGS)/ (Average inventory)
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Computing return for one period
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Return=(price change + payment)/beginning price
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