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CPA > AUD- Ratios > Flashcards

AUD- Ratios Flashcards

1
Q

Working Capital

A

Current assets – Current liabilities. This is a definition, not a ratio.

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2
Q

Current ratio

A

Current assets/Current liabilities

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3
Q

Quick ratio (acid-test ratio)

A

(Cash + Marketable securities + A/R)/Current liabilities

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4
Q

What do Liquidity Ratios Measure?

A

Measures of an entity’s short-term ability to meet its obligations.

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5
Q

List the Liquidity Ratios

A

Working Capital
Current ratio
Quick ratio
Current cash to debt ratio

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6
Q

List the Activity Ratios

A

Asset turnover
Receivable turnover
Inventory turnover
Number of days sales in inventory

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7
Q

List the Profitability Ratios

A

Profit margin on sales
Gross profit percentage
Rate of return on assets
Rate of return on common stockholders’ equity
Earnings per share
Price earnings ratio (P-E ratio)

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8
Q

List the Coverage Ratios

A

Debt to total assets ratio
Debt to equity ratio
Times interest earned
Cash to debt coverage ratio

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9
Q

What do Activity Ratios Measure?

A

Measures of an entity’s effectiveness putting its assets to use.

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10
Q

What do Profitability Ratios Measure?

A

Measures of an entity’s operating success (failure) for a period of time.

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11
Q

What do Coverage Ratios Measure?

A

Measures of the entity’s ability to meet its obligations over time (i.e., measures of long-term risk to creditors and the extent to which the entity has borrowed up to its available capacity).

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12
Q

Debt to total assets ratio

A

Total liabilities/Total assets

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13
Q

Debt to equity ratio

A

Total liabilities/Total stockholders’ equity

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14
Q

Times interest earned ratio

A

Income before interest expense and income taxes/Interest expense

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15
Q

Cash to debt coverage ratio

A

Net cash from operations/Average total liabilities

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16
Q

Asset turnover ratio

A

Net sales/Average total assets

17
Q

Accounts Receivable turnover ratio

A

Net (credit) sales/Average trade receivable (net)

18
Q

Number of days sales in receivables ratio

A

365 days/Receivable turnover

19
Q

Inventory turnover ratio

A

Cost of goods sold/Average inventory

20
Q

Number of days sales in inventory ratio

A

365 days/Inventory turnover

21
Q

Profit margin on sales ratio

A

Net income/Net sales

22
Q

Gross profit percentage

A

(Sales – Cost of goods sold)/Sales

23
Q

Rate of return on assets ratio

A

Net income/Average total assets

24
Q

Rate of return on common stockholders’ equity ratio

A

(Net income – Dividends attributable to preferred stockholders)/Average common stockholders’ equity

25
Q

Earnings per share ratio

A

(Net income – Preferred dividends)/Average number of common shares outstanding

26
Q

Price earnings ratio (P-E ratio)

A

Market price of stock/earnings per share

CPA (7 decks)

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