chapter 14 Flashcards
what are the three types of comparisons
- intracompany: comparing 2 or mire periods for the same company
- intercom[any: comparing with competitor in same industry
- industry
what are liquidity ratios
- seeing if a company can pay off its short term laibitlies
what are the liquidity ratios
working capital
current ratio
receivables turnover
inventory turniver
average collection
days in inventory
what is working capital
its good for comparing one company
what is the current ratio
better for comparing two companies vs the working capital
higher= better, more assets than liabiktie s
what is the inventory turnover
how many times inventory has been sold
higher ratio= more inventory was sold
what is days in inventory
number of days on average that it takes to sell the inventory
- lower= better
what is receivables turnover
how many times we collected our receivables
higher = better
use credit sales and if u dont have that use sales
use gross ar and if not use net recievables
what is average collection period
how many days it takes to collect our receivables
- lower= better
what are solvency ratios
measure if a company can pay off its current and non current liabilities
what are the solvency ratios
debt to total asstes
time interest earned
free cash flow
what is the debt to total assets ratio
measure how much debt we have
lower= better
percentage of assets financed by credits
what is times interest earned
can a company meet interest periods
higher= better as there is more net income vs interest expense (more flexibility )
what is free cash flow
amount of cash that a company has available to make extra expenditures
HARD to make comparisons because we are looking at dollar amounts
capital expenditures = fixed assets
what are the rpofoitbilty ratios
GPM
PM
asset turnover
return on assets
return on SE
basic earnings per share
price earnings
payout ratio
dividend yield
what is GPM
companys ability to maintain an adequate selling price above cogs
higher= better
what is PM
comparing net income to sales
- higher= better
asset turnover
how efficiently a company uses its assets to generate sales
- higher= Better–> using assets well
return on assets
looking at profoabilty of assets
- higher= better
net income is higher so profit margin is higher
what is return on SE
profit from the SE perspective
higher= better
how much income was generated based on what was invested by the SE
what is basic earnings per share
how much net income is available to our SE on a per share basis
- higer= better
HARD TO COMPARE W OTHERS
what is price earnings
easier to make comparisons
share price related to the company earnings
no better or worse because the market price changes over time
payout ratio
dividends, how a company pays its dividends
what percent did the board decide to distribute as dividends
no good or bad
what are the investors looking for
dividend yield
rate of return a SE gets from dividend
looking at market price
no good or bad just depends on investors
