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28 Cards in this Set
- Front
- Back
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Ratio analysis
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the calculation of ratios from data on financial statements
Common: -Liquidity ratios -Profitability ratios -Activity ratios -Leverage ratios |
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Current Ratio
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Current Assets/Current Liabilities; indicator of company's ability to short-term obligations.
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Quick (Acid test) Ratio
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Current Assets-Inventory/Current Liabilities; Measures company's ability to pay off short term obligations from current assets, excluding inventory.
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Inventory to net working capital
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Inventory/CA-CL; measure of inventory balance. Measures the cushion between current assets & current liabilities that may be threatened by unfavorable changes to inventory.
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Cash Ratio
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Cash+Cash Equivalents/CL; Measures the extent to which company's capital is in cash. Shows how much current obligations can be paid in cash.
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Net Profit Margin
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Net profit after taxes/Net Sales; shows how much after-tax profits are generated by each dollar of sales.
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Gross Profit Margin
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Sales-COGS/Net Sales; Indicates total margin available to cover other expenses beyond COGS and still yield a profit.
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Return on Investment (ROI)
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Net profit after taxes/Total Assets; Measures rate of return on the total assets utilized in the company; measure of management efficiency.
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Return on Equity (ROE)
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Net profit after taxes/Shareholders' Equity; Measures the rate of return on the book value of shareholders' total investment in the company.
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Earnings per share (EPS)
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Net profit after taxes-Preferred stock dividends/Average # Common Stock; Shows the after-tax earnings generated for each share of common stock.
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Inventory Turnover
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Net Sales/Inventory; Measure number of times inventory was sold during a period of time, usually a year.
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Days of Inventory
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Inventory/COGS/365; Measures the number of one day's worth of inventory that a company has on hand at a given time.
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Net Working Capital turnover
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Net Sales/NwC; Measures how effectively the net working capital is used to generate sales.
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Asset Turnover
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Sales/Total Assets; Measures the utilization of all the company's assets; measures how many sales are generated by each dollar of assets
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Fixed Asset turnover
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Sales/Fixed Assets; Measures the utilization of the company's fixed assets. Measures how many sales are generated by each dollar of fixed assets.
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Average Collection Period
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A/R/Sales for year/365; Indicates the average length of time in days that a company must wait to collect a sale after making it.
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A/R Turnover
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Annual Credit Sales/Accounts Receivable; Indicates the number of times that A/R are cycled during a period.
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A/P period
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Accounts Payable/Purchases for year/365; Indicates the average length of time in days that the company takes to pay its credit purchases.
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Days of Cash
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Cash/Net sales for year/365; Indicates the number of days of cash on hand, at present sales level.
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Debt to Asset Ratio`
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Total debt/Total Assets; Measures the extent to which borrowed funds have been used to finance company assets.
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Debt to equity ratio
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Total debt/Shareholders' Equity; Measures the funds provided by creditors versus the funds provided by owners.
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Long-term debt to capital structure
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Long-term debt/Shareholders' equity; Measures the long-term component of capital structure.
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Times interest earned
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Profit before taxes + Interest Charges/Interest Charges; Indicates the ability of the company to meet its annual interest costs.
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Coverage of fixed charges
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Measure of the company's ability to meet all of its fixed-charge obligations.
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Current liabilities to equity
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CL/Shareholders' Equity; Measures the short-term financing portion versus that provided by owners.
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PE Ratio
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Market price per share/EPS; Shows current market evaluation of a stock. Shows how much investors are willing to pay for each dollar of earnings.
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Dividend payout ratio
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Annual Dividend per share/Annual EPS; indicates the percentage of profit that is paid out as dividends.
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Dividend Yield on Common Stock
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Annual DPS/Current Market Price Per Share; Indicates the dividend rate of return to common shareholders at the current market price.
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