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31 Cards in this Set
- Front
- Back
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Recievables turnover |
Total Revenue / Average AR
Comments:(1) Slow growth in revenue with high receivables turnover –> strict policies and lost customers(2) High growth in revenue with high receivable turnover –> good credit management |
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Days of Sales Outstanding |
365 / Recievables turnover |
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Inventory Turnover |
COGS / Avg Inventory
Comments:(1) Slow growth in revenue with high inventory turnover –> inadequate inventory(2) High growth in revenue with high inventory turnover –> good inventory management
(3) Slow inventory turnover –> slow-moving inventory |
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Days of Inv on Hand |
365 / Days of sales outstanding |
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Payables turnover |
Purchases / Avg accounts payable
Comments:(1) High payable turnover indicate one of following:A- Company not taking advantage of credit facilities
B- Company is taking advantage of discounts on early payments (2) Lower payable turnover with high liquidity –> Lenient supplier credit (3) Lower payable turnover with low liquidity –> Company is facing trouble with payments |
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Days of Payables |
365 / Payables turnover |
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Operating Cycle |
Days of Sales Outstanding + Days of Inventory on Hand * Operating Cycle: The average length of time between when a firm originally purchases its inventory and when it receives the cash back from selling its product |
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Net Operating Cycle / Cash Conversion Cycle |
Days of Sales Outstanding +Days of Inventory on Hand - Days of Payables * NET Operating Cycle (Cash Cycle): The length of time between when a firm pays cash to purchase its initial inventory and when it receives cash from the sale of the output produced from that inventory |
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Graph of difference between operating cycle and cash conversion cycle |
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Working Capital Turnover |
Total Revenue / Average working capital |
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Fixed Asset Turnover |
Total Revenue / Average fixed assets |
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Total Asset Turnover |
Total Revenue / Average total assets |
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Current Ratio |
Current Assets / Current Liabilities
Comments:If it is too low (below 1), it would indicate a liquidity crisis; if it is too high, the company can pay current liabilities out of current assets |
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Quick Ratio |
(Cash + Short Term Securities + A/R) / Current Liabilities
Only difference between this and current ratio is the removal of inventory from CA |
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Cash Ratio |
(Cash + Short Term Investments) / Current Liabilities
Removes inventory and accounts receivable from current ratio numerator |
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Defensive Interval |
(Cash + Short Term Sec + A/R) / Daily Cash expenditures
Comments:It measures how long can the company continue to pay its expenses out of current assets without receiving additional cash inflows. |
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Financial leverage |
Average Total Assets / Average Equity |
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Debt to Assets |
Total Debt / Total Assets
Total of interest-bearing short/long term debt, excluding liabilities such as accrued expenses and account payables |
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Debt to Equity |
Total Debt / Equity |
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Debt to Capital |
Total Debt / (total debt + total shareholders’ equity) |
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Interest Coverage |
EBIT / Interest Expense |
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Fixed Charge Coverage |
(EBIT + Lease Payments) / (Interest + Lease Payments)
Comments:It is a more strict measure that assumes that leases payments are fixed financing expenses that should be included in examining the company’s ability to repay its obligations. Some measures adjust the previous formula to include preferred dividends. |
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Gross Profit Margin |
Gross Profit / Revenue |
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Operating Profit Margin |
Operating Profit (EBIT) / Revenue |
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Pre-Tax Margin |
EBT / Revenue |
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Net Profit Margin |
Net Income / Revenue |
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Operating Return on Assets |
EBIT / Average Total Assets |
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Return on Assets |
Net Income / Average Total Assets |
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Return on Capital |
EBIT / (Interest Debt + Equity) |
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Return on Equity |
Net Income / Average Total Equity |
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Return on Common Equity |
(Net Income - Pref Divs) / (Average Common Equity) |
