Accounting Ratios Flashcards
Return on Equity (ROE)
Indicates how much income was earned for every dollar invested by the owner
Return on Assets (ROA)
Overall measure of a company’s profitability
Financial Leverage percentage
The advantages/disadvantages that occurs as the result of earning a return on equity that is different from return on assets
Gross Profit Percentage
Reflect gross profit as percent of sales
Net Profit Margin Ratio
Measures the % of each sales dollar, on average, that represents net earnings
Earnings per Share (EPS)
Average number of shares based on the number of shares at the beginning and end of the year
Quality of Earnings Ratio
-Ratio higher than 1 = higher quality earnings
Total Asset turnover Ratio
Captures how well a company uses its assets to generate revenue
Fixed Asset Turnover Ratio
Measures a company’s ability to generate sales given an investment in fixed assets
Receivables Turnover Ratio
Measures how quickly a company collects its trade receivables
Inventory Turnover Ratio
Measures how quickly the company sells its inventory
Current Ratio
- Measures the relationship between current assets and current liabilities at a specific date
- Measures ability of company to pay current debts as they become due
Quick Ratio
Compares quick assets, defined as cash and near-cash assets, to current liabilities
Cash Ratio
Measures the adequacy of available cash
Times Interest Earned
Measure a company’s ability to meet its long-term obligations
