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Finance > Ch 17 > Flashcards

Ch 17 Flashcards

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1
Q

What is profitability? What do profitability ratios do?

A

The net result of a large number of managerial policies and decisions

Provide a measure of the aggregate financial condition of a business

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2
Q

Margin ratios

A

Total margin
Operating margin

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3
Q

Total margin definition equation and IA

A

Focuses on how much money a business makes on its revenue

TM = Net Income / Total Revenues

IA = 3.7%

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4
Q

Operating margin definition, equation, and industry average

A

Helps provide insight to how profitable the orgs main ops are

OM = Operating Income / Operating Revenue

IA = 0.5%

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5
Q

Return Ratios

A

Return on Assets
Return on Equity

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6
Q

Return on Assets definition, equation, and industry average

A

How well a business is able to utilize its assets to generate income

ROA = Net Income / Total Assets

IA = 2.9%

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7
Q

Return on Equity definition, equation, industry average

A

Measures a business’s ability to use its equity financing to generate profits

ROE = Net Income / Total Equity

IA = 49%

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8
Q

What does liquidity mean?

A

How quickly assets can be converted to cash. Measures ability for org to pay its obligations

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9
Q

Liquidity ratios

A

Current Ratio
Quick Ratio
Days Cash on Hand

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10
Q

Current ratio definition, equation, industry average

A

Measures the dollars of current assets per dollar of current liabilities

CR = Current Assets / Current Liabilites

IA = 1.6x

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11
Q

Quick Ratio definition, equation, industry average

A

Measures dollars of current assets other than inventories per dollar of current liabilities

= (Current Assets - Inventories) / Current Liabilites

IA = 2.8x

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12
Q

Days cash on hand definition, equation, industry average

A

Measures the number of days an organization could continue to pay its average Daily Cash obligations with no new cash resources becoming available

= (Cash + Cash Eq + STI) / ((Total Expenses - Dep)/365)

IA = 249.9 days

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13
Q

Debt management ratios

A

Debt Ratio
Debt to Capitalization Ratios

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14
Q

Debt ratio definition, equation, industry average

A

Measures the percentage of total capital provided by creditors and other capital suppliers that have fixed claims

= total liabilites / total assets

IA = 63%

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15
Q

Debt to cap ratio definition, equation, industry average

A

Focuses on the proportion of debt used in a businesses long term structure

= Long term debt / (long term debt + equity)

IA = 34%

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16
Q

Coverage ratios

A

Times Interest Earned Ratio
Cash Flow Coverate Ratio

17
Q

Times Interest Earned Ratio definition & equation

A

Measures the number of dollars of accounting income available to pay each dollar of interest expense

= EBIT / Interest Expense

18
Q

Cash Flow Coverage definition & equation

A

Shows amount cash flow covers fixed financial requirements

= (EBIT + lease payments +Depreciation expense) / (Interest expense + Lease payments + debt principal)

19
Q

Asset Management Ratios

A

Fixed Asset Turnover Ratio
Total Asset Turnover Ratio
Days In Pt Accounts Receivable
Average Age of Plant

20
Q

Fixed Asset Turnover Ratio definition, equation, industry average

A

Measures utilization of plant and equipment

= (Fixed asset turnover- total revenues) / Net fixed assets

IA = 31.4

21
Q

Total asset turnover ratio definition, equation, industry average

A

Measures utilization of all businesses assets

= total revenue/ total assets

IA = 1.4

22
Q

Days in Pt Accts Receivable definition, equation, industry average

A

Used to measure effectiveness in managing receivables

= Net Patient Accounts Receivable / (Net Patient Service Rev / 365)

IA = 44.6 days

23
Q

Average Age of Plant definition, equation, industry average

A

Indicates the financial age of the fixed assets of the hospital

= accumulated depreciation/ depreciation expense

IA = 11.9 years

Finance (6 decks)

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