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44 Cards in this Set
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Return on Equity ratio |
Profitability ratio
Net Income After Tax —————————— Common Equity
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Total Asset Turnover |
Sales / Total Assets
Measures the efficiency of all assets to generate sales |
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Fixed asset turnover |
Sales / fixed assets
Measures how effectively fixed assets are used to generate sales |
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Inventory turnover |
Cost of goods sold / inventory
Measures how many times per year of the inventory is sold and replaced |
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Quick ratio (acid test) |
Current assets - inventory --------------------------------- current liabilities
Most ratios close to 1 indicate good liquidity |
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Current Ratio |
Current Assets / Current Liabilities
Liquidity Ratio: measures the firm's ability to meet its short-term obligations |
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Net profit margin |
Net profit after taxes / Sales
Profitability ratio |
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Net profit margin |
Net profit after taxes / Sales
Profitability ratio |
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Operating Profit Margin |
Operating Profit / Sales = EBIT / Sales
Measures the percentage of profit earned on each sales dollar before interest and taxes |
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Gross Profit Margin |
Sales - Cost of Goods Sold / Sales
Measures the percentage of each sales dollar remaining after firm has paid for all of its cost of goods sold
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Return on Equity |
Net Income After Tax / Common Equity
Measures the return received on each dollar equity |
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Return on Assets (ROA) |
Net Income After Taxes / Total Assets
Measures the overall effect a mess of management and generating profits with available assets |
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Net Working Capital |
Current Assets - Current Liabilities
Not ratio but measures the firm's overall liquidity |
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Accounts Receivable Turnover |
Sales / Accounts Receivable |
Number of times per year accounts receivable is paid and replaced |
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Accounts Receivable Turnover |
Sales / Accounts Receivable |
Number of times per year accounts receivable is paid and replaced |
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Average Collection Period |
Accounts Receivable / daily credit sales. OR
365 Days / Receivables Turnover |
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Average payment period |
Accounts Payable / average Purchases per Day |
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Debt Ratio |
Total Liabilities / Total Assets
Measures the proportion of total assets financed by the firms creditors. Greater leverage will result in higher debt ratios. |
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Debt Ratio |
Total Liabilities / Total Assets
Measures the proportion of total assets financed by the firms creditors. Greater leverage will result in higher debt ratios. |
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Debt-to-Equity Ratio |
Long-term Debt / Stockholder's Equity
The relationship between long-term bonds provided by creditors and those provided by the firms stock owners |
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Times Interest Earned |
EBIT / Interest
Measures the firm's ability to meet its interest payments |
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Earnings per Share |
Net Income / # Shares Outstanding
Represents the number of dollars earned on each share of common stock outstanding.net figure used in the numerator should have any dividend payments subtracted out |
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Price / Earnings Ratio |
Stock Market Price / Earnings per Share
amount investors are willing to pay for each dollar of earnings : a high P/E denotes a projection of increasing future earnings |
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Market-to-Book Ratio |
Market Value per Share / Book Value per Share
Measures the market value of the firm compared to the value of the firm according to accountants |
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DuPont Ratio Analysis |
ROE = Net Income / Sales x Sales / Total Assets x 1 / 1 - (total debt/total assets) |
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Profitability Ratios |
ROE ROA Gross Profit Margin Operating Profit Margin Net Profit Marginhttps://www.facebook.com/marcos.arizmendi.56/posts/10206279345597001 |
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Liquidity Ratios |
Current Ratio Quick Ratio Net Working Capital |
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Activity Ratios |
Inventory Turnover Fixed Asset Turnover Total Asset Turnover Receivables Turnover Average Collection Period Average Payment Period |
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Financing Ratios |
Debt Ratio Debt-Equity Ratio Times Interest Earned |
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Market Ratios |
Earnings per Share Market-to-Book Ratio P/E |
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What are the 5 primary capital market securities? |
Long-term government notes & bonds Municipal bonds Corporate Bonds Corporate Stock Mortgages |
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What are the two types of municipal bonds? |
General Obligations: backed by creditworthiness of issuer
Revenue Bonds: backed by cash flow from revenue-generating project |
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Term vs Demand Security |
Term has maturity date. Demand can be redeemed any time (checking account) |
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4 Features of Money Markets |
Original maturity less than 1 year Traded via phones-electronic Active secondary market Trade in large denominations |
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Federal Funds |
Immediately available short-term funds transferred daily amongst each other; banks with excess lend at rates close to Fed rate |
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Commercial paper |
Unsecured promissory notes issued by corporations, always with original maturity less than 270 days. Issued on discounted basis. |
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Negotiable CD's |
Term deposits issued by commercial banks. Usually 100,000 to 10,000,000 denominations. |
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Repurchase agreements |
Funds sold with a promise to repurchase on a specific date. Usually secured by Treasury securities. |
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Financial Planning |
Allocation of firms resources to achieve investment plans |
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Investment Strategy |
Identifies specific investments using capital budgeting process |
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Investment Strategy |
Identifies specific investments using capital budgeting process |
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Sales Forecast |
Beginning point for financial forecast |
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Money Multiplier |
🔼D = 🔼R / RR |
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Loanable Funds Theory of Interest Rates |
Supply of funds available for lending must equal the demand for funds by those who wish to borrow |
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