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29 Cards in this Set
- Front
- Back
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Tests of Profitability
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ROE; ROA; Financial Leverage; EPS; Quality of Income; Profit Margin; Fixed Asset Turnover.
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Tests of Liquidity
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Cash Ratio; Current Ratio; Quick Ratio; Receivables Turnover; Inventory Turnover.
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Tests of Solvency and Equity Position
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Times Interest Earned; Cash Coverage; Debt-to-Equity.
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Market Tests
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P/E; Dividend Yield.
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Miscellaneous Tests
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Book Value per Share
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Return on Equity
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(Income Before Extraordinary) / (Average Owners' Equity)
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Return on Assets
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(Income + Interest Expense Net of Tax) / (Avg Assets)
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Financial Leverage
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ROE - ROA or
(Avg Assets) / (Avg SE) |
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Earnings per Share
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(Income Avail to Common SH) / (# of Common Shares)
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Quality of Income
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(Operating Cash Flows) / (Net Income)
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Profit Margin
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(Income B4 Extraordinary) / (Net Sales)
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Fixed Asset Turnover
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(Net Sales) / (Avg Net PPE)
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Cash Ratio
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(Cash & Equivalents) / (Current Liabilities)
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Current Ratio
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(Current Assets) / (Current Liabilites)
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Quick Ratio
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(Quick Assets) / (Current Liabilities)
*No Inventory in Quick Assets |
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Receivables Turnover
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(Net Credit Sales) / (Avg AR)
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Inventory Turnover
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CGS / (Avg Inventory)
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Times Interest Earned
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(Income + Interest + IncTax) / (Interest Expense)
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Cash Coverage Ratio
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(Operating Cash Flow B4 Interest and Income Tax) / (Interest Expense)
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Debt to Equity
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(Total Liabilities) / (Owners' Equity)
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Price to Earnings
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(Market Price per Share) / EPS
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Dividend Yield
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(Dividends per Share) / (Market Price per Share)
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Book Value per Share
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(Common Share Equity) / (# of Common Shares Outstanding)
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Principles
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Historical cost; Objectivity; Revenue recognition; Matching; Full Disclosure.
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Assumptions
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Seperate entity; Going concern; Unit of measure & Stable dollar; Periodicity
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Constraints
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Cost benefit; Materiality; Conservatism.
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Profit drivers
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ROE = (Net Profit Margin)(Asset Turnover)(Financial Leverage)
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/\Cash
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= /\Liabilites + /\SE - /\NonCashAssets
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Why record passive investments at LCM?
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Relevance: What is the liquidatable value? Measurability: Market value readily available.
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