Chapter 3 Flashcards
uses of cash
A firm’s activities in which cash is spent. Also called applications of cash.
all debts of all maturities to all creditors
total debt ratio
The average period in which a company collects on its credit sales
average collection period (ACP
Relationships determined from a firm’s financial information and used for comparison purposes.
financial ratios
Long-term solvency ratios are intended to address the firm’s long-term ability to meet its obligations, or, more generally, its financial leverage. These are sometimes called ____
financial leverage ratios/leverage ratios
common-size statement
A standardized financial statement presenting all items in percentage terms. Balance sheet items are shown as a percentage of assets and income statement items as a percentage of sales.
A U.S. government code used to classify a firm by its type of business operations.
Standard Industrial Classification (SIC) code
liquidity measures
short-term solvency ratios as a group are intended to provide information about a firm’s liquidity, and these ratios are sometimes called____
interest coverage ratio
The ratio that measures how well a company has its interest obligations covered
burn rate
The average daily operating cost for start-up companies. AKA the rate at which cash is burned in the race to become profitable
DuPont identity
Popular expression breaking ROE into three parts: operating efficiency, asset use efficiency, and financial leverage.
total capitalization
total long-term debt and equity is sometimes called ____
A firm’s activities in which cash is spent. Also called applications of cash.
uses of cash
financial leverage ratios/leverage ratios
Long-term solvency ratios are intended to address the firm’s long-term ability to meet its obligations, or, more generally, its financial leverage. These are sometimes called ____
financial ratios
Relationships determined from a firm’s financial information and used for comparison purposes.
Tobin’s Q ratio
the market value of the firm’s assets divided by their replacement cost
statement of cash flows
A firm’s financial statement that summarizes its sources and uses of cash over a specified period.
a measure of how the stockholders fared during the year
Return on equity (ROE)/return on book equity/return on net worth
a measure of profit per dollar of assets
Return on assets (ROA)/return on book assets
A standardized financial statement presenting all items in percentage terms. Balance sheet items are shown as a percentage of assets and income statement items as a percentage of sales.
common-size statement
total debt ratio
all debts of all maturities to all creditors
a group of the top firms in an industry
aspirant group
amortization
a noncash deduction similar conceptually to depreciation, except it applies to an intangible asset (such as a patent) rather than a tangible asset (such as a machine
firms similar in the sense that they compete in the same markets, have similar assets, and operate in similar ways
peer group
Standard Industrial Classification (SIC) code
A U.S. government code used to classify a firm by its type of business operations.
The ratio that measures how well a company has its interest obligations covered
interest coverage ratio
total long-term debt and equity is sometimes called ____
total capitalization
A firm’s activities that generate cash.
sources of cash
A firm’s financial statement that summarizes its sources and uses of cash over a specified period.
statement of cash flows
Return on equity (ROE)/return on book equity/return on net worth
a measure of how the stockholders fared during the year
average collection period (ACP
The average period in which a company collects on its credit sales
peer group
firms similar in the sense that they compete in the same markets, have similar assets, and operate in similar ways
A standardized financial statement presenting all items relative to a certain base year amount.
common-base year statement
Return on assets (ROA)/return on book assets
a measure of profit per dollar of assets
Ratios intended to describe is how efficiently or intensively a firm uses its assets to generate sales
asset utilization ratios
the market value of the firm’s assets divided by their replacement cost
Tobin’s Q ratio
common-base year statement
A standardized financial statement presenting all items relative to a certain base year amount.
aspirant group
a group of the top firms in an industry
short-term solvency ratios as a group are intended to provide information about a firm’s liquidity, and these ratios are sometimes called____
liquidity measures
sources of cash
A firm’s activities that generate cash.
Popular expression breaking ROE into three parts: operating efficiency, asset use efficiency, and financial leverage.
DuPont identity
a noncash deduction similar conceptually to depreciation, except it applies to an intangible asset (such as a patent) rather than a tangible asset (such as a machine
amortization
asset utilization ratios
Ratios intended to describe is how efficiently or intensively a firm uses its assets to generate sales
The average daily operating cost for start-up companies. AKA the rate at which cash is burned in the race to become profitable
burn rate
Current Ratio
Current Assets/Current Liabilities
Quick Ratio
(Current Assets - Inventory) / Current Liabilities
Cash Ratio
Cash/Current Liabilities
Net Working Capital
Current Assets - Current Liabilities
Net Working Capital to Total Assets
Net Working Capital/Total Assets
Total Debt Ratio
(Total Assets - Total Equity)/Total Asets OR Total Debt/Total Assets
Debt-Equity Ratio
Total Debt/Total Equity
Equity Multiplier
Total Assets/Total Equity OR 1 + (Debt/Equity)
Long-Term Debt Ratio
Long Term Debt/(Long Term Debt + Total Equity)
Assets =
Debt + Equity
Debt =
Assets - Equity
Total Debt =
Current Liabilities + Long Term Debt
Times Interest Earned
Earnings before interest and tax/interest
Cash Coverage =
(Earnings Before Interest and Tax + Depreciation)/Interest
Inventory Turnover =
Cost of Goods Sold/Inventory
Days’ Sales in Inventory =
365/Inventory Turnover
Receivables Turnover =
Sales/Accounts Receivable
Days’ Sales in Receivables =
365/Receivables Turnover
Total Asset Turnover =
Sales/Total Assets
Net Working Capital Turnover =
Sales/Net Working Capital
Fixed Asset Turnover =
Sales/Net Fixed Assets
Profit Margin =
Net Income/Sales
Return on Assets =
Net Income/Total Assets
Return on Equity =
Net Income/Total Equity
Earnings Per Share =
Net Income/Shares Outstanding
Price Earnings Ratio =
Price Per Share/Earnings Per Share
Price-Sales Ratio =
Price Per Share/Sales Per Share
Market-to-Book Ratio =
Market Value Per Share/Book Value Per Share
Dupont Identity =
ROE = Profit Margin x Total Asset Turnover x Equity Multiplier
Interval Measure =
Current Assets/Average Daily Operating Costs
Net Working Capital Turnover
Sales/Net Working Capital
Price Earnings Growth Ratio =
Price-Earnings Ratio/Earnings Growth Rate %
Tobin’s Q Ratio =
Market Value of Assets/Replacement Cost of Assets
Enterprise Value-EBITDA Ratio =
Enterprise Value/EBITDA
