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FIN 301 > Chapter 4 - Ratios > Flashcards

Chapter 4 - Ratios Flashcards

1
Q

Leverage ratios

A

How much the firm has borrowed and its obligation to pay interest

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2
Q

Long-term debt ratio

A

Long-term debt / Long-term debt + equity

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3
Q

Long-term debt equity ratio

A

Long-term debt / Equity

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4
Q

Total debt ratio

A

Total liabilities / Total assets

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5
Q

Times interest earned

A

EBIT / Interest expense

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6
Q

Cash coverage ratio

A

EBIT + Depreciation / Interest expense

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7
Q

EBIT

A

Earnings before interest and tax

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8
Q

Liquidity

A

How easily the firm can obtain the cash it needs to meet its obligations

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9
Q

Current ratio

A

current assets / current liabilities

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10
Q

Quick (acid test) ratio

A

Cash + marketable securities + Accounts Receivable / Current liabilities

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11
Q

Cash ratio

A

Cash + marketable securities / Current liabilities

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12
Q

Efficiency

A

How intensively the firm uses its assets

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13
Q

Asset turnover ratio

A

Sales / Avg total assets

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14
Q

Inventory turnover

A

COGS / Avg Inventory

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15
Q

Days in inventory

A

Avg inventory / Daily COGS

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16
Q

Daily COGS

A

Cogs/365

17
Q

Receivable Turnover

A

Sales / Avg Receivables

18
Q

Average Collection Period

A

Avg Receivables / Avg Daily sales

19
Q

Average daily sales

A

Sales / 365

20
Q

Profitability

A

measure return on investment

21
Q

ROC

A

Net income + Interest / Long-term debt + Shareholder equity

22
Q

ROE

A

net income/equity (equal to Return on Assets (Leverage ratio * Asset turnover * Operating Profit Margin * Debt burdern))

23
Q

Value & Value Added

A

Market capitalization, MVA, Market to book ratio, EVA

24
Q

Market capitalization

A

shares * price per share

25
Q

MVA

A

Market capitalization - equity (book value)

26
Q

Market to book ratio

A

market value of equity / book value of equity

27
Q

EVA

A

Residual income = Net income - (Cost of equity * equity)

28
Q

Sustainable growth

A

Payout ratio, plowback ratio, growth in equity from plowback

29
Q

Payout ratio

A

dividends / earnings (i.e. net income)

30
Q

Plowback ratio

A

1 - payout ratio

31
Q

Growth in equity from plowback

A

earnings (i.e. net income)0 - dividends/equity

FIN 301 (2 decks)

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