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29 Cards in this Set
- Front
- Back
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current ratio
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Current assets/ Current liabilities
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what happens if net cash provided or used by operating, financing and investing activities are added together
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change in cash
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The cash flow from operating activities will be greater than net income when the accounts receivable account has
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increased
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Depreciation is added to ________ to determine CFO
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net income
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The amount of leverage used by the firm is determined by management decision with regard to the _________ problem.
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capital structure
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Three potential financial statement users are _____,_____ and _______.
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creditors, investors, and management
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Stockholders’ return is measured by the return on _____ while management efficiency is measured by return on _____.
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equity, assets
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_________ is an example of a coverage ratio.
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times interest earned
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On the statement of cash flows the repayment of debt principal would be classified as a _______ account.
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financing
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operating activities on statement of cash flows
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Payments for inventory, payments for salaries, cash received from sale of goods.
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investing activities on the statement of cash flows
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Sale of property, purchase of equity securities, loans to others.
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financing activities on the statement of cash flows:
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Proceeds from borrowing, payment of dividends, repayment of debt
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techniques used by financial statement analysis
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common size, trend analysis, industry average, ratio analysis
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What does the price to earnings ratio measure?
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The multiple that the stock price places on firm’s earnings
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What do the asset turnover ratios measure
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Management’s effectiveness in generating sales from investments in assets
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How is it possible for a firm to be profitable and still go bankrupt
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The firm has positive net income but fails to generate cash from the operation.
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In general a ratio of ‘output’ to “input” is a measure of
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Efficiency.
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Increasing the days payable period will cause the cash conversion cycle to ______
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decrease
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Depreciation is _______ to net income to determine CFO
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added
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The debt to asset ratio for a firm is 50% that means
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The debt to equity ratio is 100%.
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direct method
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Calculating cash flows from operating activities by subtracting cash paid to suppliers, employees and other cash expenditures from cash collected from customers.
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asset turnover ratio
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Net sales divide by total assets
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cash conversion cycle
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Average collection period minus days payable outstanding plus days inventory held
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the cash conversion cycle can be negative if the __________
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days payable outstanding is really large
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indirect method
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Calculating cash flows from operating activities by adjusting net income for deferrals, accruals, and other non expenses
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net working capital
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Current assets minus current liabilities
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leverage is _______(list three)
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1) A measure of the capital structure of the firm
2) Measure by the debt to asset ratio. 3) Measured by the debt to equity ratio. |
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cash conversion cycle
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Average collection period plus days inventory held minus days payable outstanding
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acid test
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current assets - inventory / current liabilities
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