Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
42 Cards in this Set
- Front
- Back
Cash flow-to-revenue ratio
|
- Measures the amount of operating cash flow generated for each dollar of revenue
= CFO / net revenue |
|
How does an increase in accounts payable affect cash collections?
How does an increase in accounts receivable affect cash collections? |
A. P. increase decresases cash collections.
A. R. increase has no effect on cash collections. (Accounts payable results from a firm's purchases from its suppliers.) |
|
Where are dividends paid reported on the Cash Flow Statement in US Gaap and IFRS?
|
US GAAP - CFF
IFRS - CFO or CFF |
|
Sale of obsolete equipment is classified as cash flow from...
|
CFI
|
|
retiring debt secureties by issuing equity is classified as....
|
a non-cash transaction.
|
|
How are dividends RECEIVED reported?
|
CFO
|
|
The CF statement can be converted into common-size format by expressing each line-item as a percentage of....
|
Revenue
|
|
How do you calculate "Total Cash Collections"?
|
Total Cash Collections = Sales - increase in receivables
|
|
How do you calculate "Cash Paid to Suppliers"?
|
Cash Paid to Suppliers = - COGS + decrease in inventory + increase in A.P.
|
|
What are "Trade Payables" ?
|
similar to accounts payable, it is an amount of money owed to suppliers.
|
|
What is "Working Capital"? (Sometimes called "Net Working Capital")
|
Current Assets - Current Liabilities
|
|
What do "Activity Ratios" measure?
What ratios are included? |
how efficiently the firm is managing its assets. // Efficiency of day-to-day tasks / operations.
Include: Receivables turnover, days of sales outstanding, inventory turnover, days fo inventory on hand, payables turnover, number of days of payables, total asset turnover, fixed asset turnover, working capital turnover. |
|
What do "Liquidity Ratios" measure?
What ratios are included? |
the ability to meet s-t liabilities.
Include: current ratio, quick ratio, cash ratio, defensive ratio, cash conversion cycle |
|
What do "Solvency Ratios" measure?
|
the ability to meet l-t liabilities
|
|
What do "Profitability Ratios" measure?
|
the ability to generate profitable sales from asset base.
|
|
What do "Valuation Ratios" measure?
|
Quality of asset or flow associated wtih an ownership claim
|
|
What does "Dividends Declared" refer to?
|
total dividends on a firm-wide basis
|
|
The proportion of a firm's N.I. that is retained to fund growth is an important determinant of the firm's ______________________ .
|
Sustainable growth rate
|
|
What is the "Retention Rate (RR)" ?
|
The proportion of earnings reinvested.
|
|
What is the formula for Sustainable Growth rate?
|
g = RR x ROE
(RR = Retention Rate) |
|
How does CFA define a Business Segment?
|
a portion of a larger company that accounts for more than 10% of the company's revenues or assets, and is distinguishable from the company's other lines of business in terms of the risk and return characteristics of the segment.
|
|
Three methods of examining the variability of financial outcomes around point estimates are:
|
sensitivity analysis, scenario analysis and simulation
|
|
For ratios that use only income statement items, use values from....
|
CURRENT income statement.
|
|
What is a "Pure Ratio"
|
if Numerater / Denominator both come from either income statement or balance sheet.
|
|
What is a "Mixed Ratio"
|
Either Numerator / Denominator comes from the Income Statement, and the other from the Balance Sheet.
|
|
For ratios that use only balance sheet items, use values from....
|
CURRENT balance sheet
|
|
For ratios using both "Income Statement" and "Balance Sheet" items, use values from....
|
CURRENT income statement and AVERAGE value for balance sheet item.
|
|
Inventory Turnover
|
COGS / avg. Inventory
(How many times does inventory drop to 0 and you need to re-purchase) |
|
Days of inventory on hand (DOH)
|
365 / Inventory Turnover
(number of days that inventory is on hand) |
|
Receivables Turnover
|
Revenue / Avg. A.R.
|
|
Days of sales outstanding (DSO)
aka Average Collection Period |
365 / Receivables Turnover
(Avg. number of days it takes to collect cash from customer / Credit Terms) |
|
Payables Turnover
|
Purchases / avg. Trade Payables
|
|
Number of days of payables
|
365 / Payables Turnover
|
|
Working Capital Turnover
|
Revenue / avg. working capital
|
|
Working capital
|
Current Assets - Current Liabilities
|
|
Asset Turnover
|
Sales / avg. Total Assets
|
|
Inventory Turnover
|
COGS / avg. Total Inventory
|
|
A company's current ratio is 1.9 If some of the accounts payable are paid off from the cash account, what happens to the current ratio?
|
Current Ratio = (Cash + A.R. + inv) / A.P.
So the numerator decreases by less than the denominator, so Current Ratio increases. |
|
A company's quick ratio is 1.2. If inventory were purchased for cash, what happens to the quick ratio?
|
Quick ratio = (Cash + A.R.) / AP (Inventories are excluded)
Quick ratio decreases. |
|
Cash Conversion Cycle
- what type of ratio? - equation? |
(Liquidity Ratio)
CCC = Days Sales Outstanding + Days inventory on hand - number of days of payables = DSO + DOH - days of payables how long it takes to sell inventory and receive payment. |
|
Interest Coverage Ratio
- what type of ratio? - equation? |
(Solvency Ratio)
= EBIT / Interest Payments |
|
Fixed Charge Coverage Ratio
- what type of ratio? - equation? |
(Solvency Ratio)
(EBIT + Lease Payments) / (Int payments + Lease Payments) |