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35 Cards in this Set
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Liquidity ratios

provide information about the liquidity or shortterm debt paying ability of the firm. These are the common ones you should be familiar with.


Working Capital

current assets – current liabilities


Current Ratio

current assets / current liabilities


Quick Ratio

(current assets – inventory) / current liabilities. (This ratio is also known as the acid test.)


Cash Ratio

(cash + marketable securities) / current liabilities


Activity ratios

measure the firm’s operating efficiency. They show how efficiently management is using the assets at their disposal.


Inventory Turnover

Cost of Goods Sold / Average Inventory


Days to Sell Inventory

365 / Inventory Turnover


Accounts Receivable Turnover

Sales / Average Accounts Receivable


Receivable Collection Period

365 / Accounts Receivable Turnover


Working Capital Turnover

Sales / Average Working Capital


Total Asset Turnover

Sales / Average Total Assets


Fixed Asset Turnover

Sales / Average Fixed Assets


Equity Turnover

Sales / Average Equity


Quick was to firgure ratio that has the word turnover in it

An easy way to remember these "Turnover" ratios is that sales are always in the numerator and the name of the ratio in the denominator


COGS

Cost of Goods Sold (aka Cost of Sales)


Gross Profit

Gross Profit = Net Sales – COGS


Operating Profits (EBIT)

Earnings Before Interest and Taxes


EBT

Earnings Before Taxes


EAT

Earnings After Taxes (aka Net Income)


Gross Profit Margin

Gross Profit / Sales


Operating Profit Margin

EBIT / Sales


Net After Tax Profit Margin

EAT / Sales


Net Before Tax Profit Margin

EBT / Sales


Return on Assets (ROA)

EAT / Total Assets


Return on Total Capital (ROTC)

(EAT + I) / Total Capital (Where I = Interest Expense)


Return on Equity (ROE)

EAT / Equity


Quick way to figure out ratio with margin in it

An easy way to remember all the “Margins” is that sales are always in the denominator and the name of the ratio is in the numerator.


Debt (or Solvency) ratios

measure the financial strength of the firm. Creditors are very interested in these ratios. Bankruptcy is actually predictable when a firm meets certain criteria in relation to deteriorating solvency ratios.


Total Debt to Equity

Total Liabilities / Equity


Debt to Equity

Total Longterm Debt / Equity


Assets to Equity (leverage multiplier)

Total Assets / Equity


Times Interest Earned

EBIT/I (Where I = Interest Expense)


sustainable growth rate (g)

g = ROE X b, where b is equal to the retention ratio.
The retention ratio is 1 – the payout ratio. The payout ratio is dividends / earnings 

Return on Equity (ROE)

Assets to Equity x Asset Turnover x Net After Tax Profit Margin
or EAT/Equity 