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會計學 I ACCT 215 > Chapter 14 Ratios > Flashcards

Chapter 14 Ratios Flashcards

1
Q

Horizontal Analysis
Base Amount

A

Year-over-year Trend analysis using amounts or %

Base Amount = Value of Base Year

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2
Q

Vertical Analysis
Base Amount in
1. Stmt of Financial Position
2. Stmt of Income

A

Compare within a year on CASH or ASSETS
a.k.a. Common Size Analysis

  1. Stmt of Financial Position
    Base Amount = Total Assets
  2. Stmt of Income
    Base Amount = Sales or Revenue

(Largest in Stmt)

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3
Q

Ratios measure a company’s short-term ability to pay its maturing obligation and to meet unexpected needs for cash

A

Liquidity ratios

  1. Working Capital
  2. Current Ratio
  3. Receivables Turnover
  4. Average Collection Period
  5. Inventory Turnover
  6. Days in Inventory
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4
Q

Working Capital

A

= Current Assets - Current Liabilities
($)

Short-term debt-paying ability

+
Liquidity ratio (not always good)

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5
Q

Current Ratio

A

= Current Assets / Current Liabilities
(: 1)
Short-term debt-paying ability
+
Liquidity ratio (not always good)

If current ratio is high but inventory / receivable turnover is low → INFLATED no good

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6
Q

Receivables Turnover

A

= Sales / Average Gross Receivables
(credit sales only)
(Times)

Measures # of times of receivables collected during the period

+
Liquidity ratio

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7
Q

Average Collection Period

A

= 365 / Receivables Turnover
= 365 / [Sales / Average Gross Receivables]
(Day)

of Days to collect outstanding receivables
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Strict collection policies reduce sales & clients.

-
Liquidity ratio

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8
Q

Inventory Turnover

A

= CoGS / Average Total Inventory
(Times)

Measures the # of times that inventory is sold (turn into CoGS) during the period

+
Liquidity ratio

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9
Q

Days in Inventory

A

= 365 / Inventory Turnover
= 365 / [CoGS / Avg Total Inventory]
(Day)

Measures the # of days to sell inventory during the period

-
Liquidity ratio

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10
Q

Ratios that measure a company’s ability to pay its liabilities

A

Solvency ratios

  1. Debt to Total Assets ratio
    1’. Debt to Equity ratio
  2. Times Interest Earned
  3. Free Cash Flow
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11
Q

Debt to Total Assets

A

= Total Liabilities / Total Assets
(%)

Measures % of total assets financed with debts

An index of ability to pay debts

-
Solvency ratio

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12
Q

Debt to Equity ratio

A

= Total Liabilities / Total Shareholders’ Equity
(%)

Shows the use of borrowed funds
relative to the equity provided by shareholders

-
Solvency ratio

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13
Q

Times Interest Earned

A

= EBIT / Interest Exp
= *[Net Income + Int Expense + I/Tax Exp] / * Int Expense
(Times)
(EBIT = Income form operations)

Ability to meet interest payments

+
Solvency ratio

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14
Q

Free Cash Flow

A

= net Cash provided by Operating
- net Capital Expenditures
- Dividends paid
(Cash is from Stmt of Cash Flow)
($)

Measures cash-generating capability.
Cash left over from operating, capital expenditures & dividends.

+
Solvency ratio

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15
Q

Ratios that measure a company’s operating success for a period of time by using assets efficiently to generate enough revenue

A

Profitability Ratios

  1. Gross Profit Margin
  2. Profit Margin
  3. Assets Turnover
  4. Return on Assets
  5. Return on Common Shareholders’ Equity
  6. Basic Earnings per Share
  7. Price-Earnings (P-E) Ratio
  8. Payout Ratio
  9. Dividend Yield
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16
Q

Gross Profit Margin

A

= Gross Profit / Sales
= [Sales - CoGS] / Sales
(%)

Margin between selling price and cost, indicating ability to maintain adequate selling price above cost

+
Profitability ratio

17
Q

Profit Margin

A

= Net Income / Sales
(%)

Indicates net income generated by each dollar of sales, indicating effectiveness of expenses control (operating exp, interest exp, i/tax exp)

+
Profitability ratio

18
Q

Asset Turnover

A

= Sales / Average Total Assets
(Times)
(only for merchandise companies)

Efficiency of assets used to generate sales

+
Profitability ratio

19
Q

Return on Assets

A

= Net Income / Average Total Assets
(%)
= Profit Margin x Asset Turnover

measures overall profitability of assets
by profit earned on each dollar of assets

+
Profitability ratio

20
Q

Return on Common Shareholders’ Equity

A

= (Net Income - Preferred Dividends) / Average Common Shareholders’ Equity
[Common S/E = Common Share + Retained Earnings ONLY]
(%)

Net income earned as % of common shareholders’ investment
(so no preferred shares &
no other comprehensive income)

+
Profitability ratio

21
Q

Payout Ratio

A

= Cash Dividends Declared / Net Income
(%)

% of net income distributed as cash dividends

+ (but - if seeking price appreciation)
Profitability ratio

22
Q

Dividend Yield

A

= Dividends Declared per Share / Market Price per Share
(%)

Rate of return a shareholder earned from dividends as % of market price

+ (but - if seeking price appreciation)
Profitability ratio

23
Q

Basic Earnings per Share (EPS)

A

= (Net Income - Preferred Dividends) / Weighted Average # of Common Shares
($)

Net income earned on each common share

NOT COMPARABLE between companies
+
Profitability ratio

24
Q

Price-Earnings Ratio
(P-E ratio)

A

= Market Price per Share / Basic Earnings per Share
(Times)

Relationship between market price & earnings per share.
Indicate investors’ expectation of profitability

+
Profitability ratio

25
Q

Unit of Ratios
= $

A
  • Working Capital
  • Free Cash Flow
  • Basic EPS

WFB

26
Q

Unit of Ratios
= :1

A

Current Ratio

27
Q

Unit of Ratios
= Days

A
  • Days in Inventory
  • Average Collection Period

DA

28
Q

Unit of Ratios
= Times

A
  • Inventory Turnover
  • Receivables Turnover
  • Times Interest Earned
  • Asset Turnover
  • Price-Earnings Ratio

PATRI
PE ratio & turnovers

29
Q

Unit of Ratios
= %

A
  1. Debt to Total Assets
  2. Gross Profit Margin
  3. Profit Margin
  4. Return on Assets
  5. Return on Common Shareholders’ Equity
  6. Payout Ratio
  7. Dividend Yield

G-PDPRRPD

30
Q

Life-Cycle of Corporate

A
  1. Introductory
    -$ Net loss
  2. Growth
    $ Operating
    $$ Investing
    (covered by F)
    $$$ Finance
    $ Dividend
  3. Maturity
    $$$$ Operating
    $$$ Investing
    (covered by O)
    $$$$ Finance
    $$ Dividend
  4. Decline
    $ Operating
    $ Investing
    (sold to pay F)
    $ Finance
    ? Dividend
31
Q

Ratios that Lower is desired

A
  1. Days in Inventory
  2. Average Collection Period
  3. Debt to Total Assets (or Equity)

會計學 I ACCT 215 (5 decks)

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