Chapter 4: Fundamental Concepts in Financial Management and Financial Forecasting Flashcards
1
Q
What are the 4 ratios?
A
- Liquidity Ratios
- Asset Management ratios
- Debt Management ratios
- Profitability ratios
- Market value ratios
2
Q
What is a liquid asset?
A
- Easily converted to cash
- No need to affect asset price too much
3
Q
What is liquidity ratio?
A
- Relationship of cash/ other current assets over current liabilities
4
Q
What is current ratio?
A
- Current assets over current liabilities
5
Q
What is quick ratio (acid test)?
A
- (Current assets - Inventories) over current liabilities
6
Q
What is asset management ratio?
A
- How effective the firm manages assets
7
Q
What is inventory turnover ratio?
A
- Sales over inventories
8
Q
What is Day Sales Outstanding (DSO)?
A
- Receivables over average daily sales
9
Q
What is fixed assets turnover ratio?
A
- Sales over net fixed assets
10
Q
What is total assets turnover ratio?
A
- Sales over total assets
11
Q
What are debt management ratios?
A
-How well firm’s manage debt.
12
Q
What is debt ratio?
A
- Total debt over total assets
13
Q
What is times-interest-earned (TIE) ratio?
A
- EBIT over interest charged
- Firms’ ability to pay back interest
14
Q
What are profitability ratios?
A
-How equity, liquidity, asset management and debt affect operation results
15
Q
What is operating margin?
A
- EBIT/Operating income over sales
