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Finance 317 > Chapter 4 - Financial Statement Analysis > Flashcards

Chapter 4 - Financial Statement Analysis Flashcards

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1
Q

What is the right hand side of the balance sheet called?

A

Capital structure. It finances the left hand side.

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2
Q

Current Ratio

A

Current Assets/Current Liabilities

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3
Q

Quick Ratio

A

(Current Assets-Inventories)/Current Liabilities

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4
Q

Inventory Turnover Ratio

A

Sales/Inventories

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5
Q

DSO Ratio (Average Collection Period) (Average Number Of Days After A Sale Before Receiving Cash)

A

Receivables/Avg Sales Per Day or Receivables/(Annual Sales/365) This ratio is an algebraic equivalent of the A/R formula

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6
Q

FA Turnover Ratio

A

Sales/Net Fixed Assets

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7
Q

TA Turnover

A

Sales/Total Assets

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8
Q

Debt Ratio

A

Total Debt/Total Assets

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9
Q

TIE Ratio

A

EBIT/Interest Charges

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10
Q

Operating Margin Ratio

A

EBIT/Sales

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11
Q

Profit Margin Ratio (Return On Sales)

A

Net Income/Sales

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12
Q

Basic Earning Power

A

EBIT/Total Assets

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13
Q

ROA Ratio

A

Net Income/Total Assets

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14
Q

ROE Ratio

A

Net Income/Total Common Equity

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15
Q

Price Earnings Ratio (How much investors are wiling to pay for $1 of earnings)

A

Price/Earnings per share

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16
Q

Market Book Ratio (How much investors are willing to pay for $1 of book value equity)

A

Market Price/Book value per share

17
Q

DuPont Equation

A

ROE= Profit Margin x TA Turnover x Equity Multiplier

18
Q

Equity Multiplier

A

Total Assets/Equity

19
Q

Extended DuPont

A

See Notes

20
Q

What happens when a company buys back stock?

A

It goes into treasury stock. It reduces the equity section by the amount it bought back. The market reacts by causing an increase in the stock price. This happens because when they buy it back it sends a signal to the market saying that the company thinks that its stock is undervalued.

Finance 317 (3 decks)

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