Analysis - Basic Tax Rules Flashcards
Net Worth (Balance Sheet)
Assets-Liabilities= Net Worth
Net Working Capital
Current Assets - Current Liabilities
Current Ratio
Current Assets / Current Liabilities
- Used to measure liquidity
Acid test Ratio (AKA Quick Ratio)
(Current Assets - Inventory) / Current Liabilities
- Used as a more stringent test of liquidity
Tangible Asset Value
Total Assets-Intangibles
*Measure of true asset value of the company
Bond Ratio
Long Term Debt / Total Long Term Capital
*Capitalization ratio to evaluate the company’s capital structure. % from sale of debt.
Preferred Stock Ratio
Preferred Stock / Total Long Term Capital
- Total Long Term Capital consists of long term debt, preferred stock, and common equity.
- Capitalization ratio to evaluate the company’s capital structure. % from preferred stockholders
Common Stock Ratio
(Capital at Par + Capital in Excess of Par + Retained Earnings) / Total Long Term Capital
*Capitalization ratio to evaluate the company’s capital structure. % from common stockholders
Operating Margin of Profit
Operating Profit / Net Sales
*Basic measure of operating profitability, compares operating margin to net sales
Bond Interest Coverage
(Total Operating and Non-Operating Income) / Bond Interest Expense
*Measures the ability to meet bond interest expense. Bond interest is paid after all operating expenses.
Net Profit
Net Income after Tax / Net Sales
*Measures the final profitability of the company after all expenses are deducted.
Debt Service Coverage Ratio
Operating Income / (Annual Interest Cost + Principal Repayment)
Leading Economic Indicators
-Show where the economy is likely to head in the next 6 months
There are 10 leading economic indicators:
-New Consumer Goods Orders
-Initial Claims for Unemployment
-Length of Manufacturing Workweek
-Delivery Delays by Vendors
-Building Permits
-Contract for Plants and Equipment
-Stock Prices Measured By the Standard and Poor's
500 Average
-Index of Consumer Expectations
-Money Supply (M-2)
-Spread Between Yield of 10-Year Treasuries and
Federal Funds
Coincident Economic Indicators
-Show where the economy is right now
Most important indicator: Index of Industrial Production
Other Indicators:
- Personal Income Levels
- Employment Levels
- Manufacturing and Trade Sales
- Gross Domestic Product
Lagging Economic Indicators
-Show where the economy was in the last 6 months
Most important indicators: Reported Corporate Profits and Consumer Debt Levels
Other Indicators:
- Employment Duration
- Inventory to Sales Ratio
- Labor Cost Per Manufacturing Unit
- Commercial Loans Outstanding
- Ratio of Consumer Credit to Income Level
