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59 Cards in this Set
- Front
- Back
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Working Capital =
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Current Assets (CA) - Current Liabilities (CL)
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Current Ratio =
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Current Assets (CA) / Current Liabilities (CL)
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Quick or Acid Test Ratio =
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(Cash + Marketable Securities + A/R) / Current Liabilities (CL.
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Cash Ratio =
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(Cash + Securities) / Current Liabilities (CL)
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Cash Flow Ratio =
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Operating Cash Flow / Current Liabilities (CL)
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Debt to Total Assets =
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Total Debt / Total Assets
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Debt-to-Equity Ratio =
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Total Debt / Total Equity
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Long-Term Debt to Equity =
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Long-Term Debt (LTD) / Equity
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Total Debt to Total Capital Ratio =
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Total Debt / Total Assets (Same as Debt to Total Assets Ratio)
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Times Interest Earned =
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EBIT (earnings before interest and taxes) / Interest
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Days' Purchases in AP =
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(Average AP / Credit Purchases) * 365
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Cash Flow to Fixed Charges Ratio =
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(Operating Cash Flow + Interest Expense + Tax) / Interest Expense
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Fixed Charge Coverage Ratio =
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EBIT / Interest
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Financial Leverage Ratio =
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Assets / Equity 2.0 reflects liabilities are equal to equity
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Operating Cycle =
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Days' Sales in A/R + Days' Sales in Inventory
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A/R Turnover =
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Credit Sales / Average A/R
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Days' Sales in Receivables (1) =
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(Average A/R / Credit Sales) * 365
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Days' Sales in Receivables (2) =
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365 / (A/R Turnover)
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Inventory Turnover =
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COGS (Cost Of Goods Sold) / Average Inventory
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Days' in Inventory (1) =
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(Average Inventory / COGS) * 365
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Days' in Inventory (2) =
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365 / (Inventory Turnover)
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Earnings Per Share (EPS) =
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(Net Income - Preferred Dividends) / Weighted Average Common Shares
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Diluted Earnings Per Share =
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(Net Income - Preferred Dividends + Interest on Convertible Debt) / Diluted Weighted Average Common Shares
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P/E Ratio =
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Market Price of Stock / EPS
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Gross Profit Margin =
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Gross Profit / Sales
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Operating Profit Margin =
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Operating Profit / Sales
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Net Profit Margin =
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Net Income / Sales
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Return on Assets =
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Net Income / Average Total Assets
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Du Pont Model =
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Net Profit Margin * Asset Turnover * Financial Leverage
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Return on Equity =
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Net Income / Average Equity
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Dividend Payout Ratio =
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Common Dividend / (Net Income - Preferred Dividends)
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Dividend Yield =
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Dividends Per Share / Market Price of Stock
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Sustainable Equity Growth =
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Return on Equity (1 - Dividend Payout Ratio)
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Working Capital Definition
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Is a measure of a company's ability in the short run to pay its obligations. It looks at the short-term financial health. A positive value of working capital indicates there are enough current assets to cover current obligations.
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Current Assets (CA) Definition
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Are defined as cash and other liquid investments. Such as inventory and accounts receivable that can be converted to cash within a year.
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Current Liabilities (CL) Definition
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Are defined as obligations that will be paid within one year. Such as accounts payable and notes and interest payable.
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Current Ratio Definition
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Measures the degree to which current assets cover current liabilities. A higher ratio indicates greater ability to pay current liabilities with current assets thus greater liquidity.
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Quick or Acid-test Ratio Definition
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Examines liquidity from a more immediate aspect than does the current ratio by eliminating inventory from current assets. A reasonable ratio is 1.
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Cash Ratio Definition
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Compares only cash and marketable securities to current liabilities. It analyzes liquidity in a more conservative manner than the quick or acid-test ratio by looking at a company's immediate liquidity.
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Cash Flow Ratio Definition
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Measures a firms ability to meet its debt obligations with cash generated in the normal course of business. A deteriorating cash flow ratio over time indicates impending liquidity problems
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Days' Purchases in AP Definition
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Usually indicates payment terms that the company has with its suppliers. A large ratio indicates that the firm has good relations with its supplier or that it is in default.
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Capital Structure Definition
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Is the mix of long-term debt on which interest and principle payments must be made and equity in the form of common and preferred stock which a firm uses to finance operations. It is directly related to leverage
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Financial Leverage Definition
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Is the use of debt (fixed cost funds) to increase returns to shareholders. Debt that is too low may result in lost opportunities. Debt that is too high may affect the company in difficult times.
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Operating Leverage Definition
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Is the existence of fixed operating costs. Because these costs are fixed…the greater the effect changes in sales have on operating income.
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Total debt to Total Assets Definition
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This ratio shows the % of assets financed by creditors and indicates how well creditors are protected if the company becomes insolvent
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Total Debt to Total Capital Definition
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This measures the proportion of debt compared to the total capital of the firm. A high ratio indicates that a higher amount of debt to finance operations
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Debt to Equity Definition
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This ratio measures the firms ability to pay LT debt and how well LT creditors are protected. A higher ratio indicates higher LEVERAGE and higher chance of bankruptcy
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Long-Term Debt to Equity Definition
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Compares LT Debt only to Equity. A firm with low ratio has the ability to raise LT debt if needed because its fixed financing costs are low.
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Fixed Charge Coverage Ratio Definition
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Measures the company's ability to satisfy fixed financing expenses
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Times Interest Earned Ratio Definition
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Measures the firm's ability to pay interest through its operations. When this ration in combined with the debt ration in gives an analyst a strong indication of a firms ability to remain solvent.
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Cash Flow to Fixed Charges Definition
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Measures a firm's ability to satisfy fixed charges
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Operating Cycle Definition
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indicates how quickly the company with receive cash once inventory is acquired or a product is manufactured. A shorter Operating Cycle = improved liquidity
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A/R Turnover Ratio Definition
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measures the average number of times that receivables from sales are collected during a year.
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Days' Sales in Receivables Definition
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Measures the liquidity of receivables. An internal analyst would use this ratio and compare it against the company's credit terms to see how efficiently the company manages its receivables.
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Inventory Turnover Ratio Definition
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Measures the average number of times that inventory was sold during a year.
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Earnings Yield= |
Earnings per share/Market price per share |
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Dividend Discount Model |
Dividends per share / Cost of capital - Dividend growth rate
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Book Value Per Share |
Amount of net assets available to shareholders / number of shares outatanding |
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Cost of New Preferred Stock |
Dividend/Net issue proceeds |
