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35 Cards in this Set

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Liquidity ratios
provide information about the liquidity or short-term 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 Long-term 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