Chapter 8 - Ratio Analysis Flashcards
What relationship does the numerator have with the ratio?
Direct
If numerator goes up, ratio goes up
The denominator has what relationship with the ratio?
Inverse
If the denominator goes up, the ratio goes down
Current Ratio:
Current Assets / Current Liabilities
Quick Ratio:
Current Assets - Inventory / Current Liabilities
Accounts Receivable Turnover:
Sales (net) / Average Accounts Receivable (net)
Days Sales in Accounts Receivable:
Ending Accounts Receivable (net) / (Sales (net) / 365)
Inventory Turnover:
COGS / Average inventory
Days in Inventory:
Ending Inventory / (COGS / 365)
Accounts Payable Turnover:
COGS / Average Accounts Payable
Days in Payables Outstanding:
Ending Accounts Payable / (COGS / 365)
Cash Conversion Cycle:
Days Sales in AR + Days in inventory - Days of payables outstanding
Asset turnover:
Sales (net) / Average total assets
Profit Margin:
Net Income / Sales (net)
Return of Assets:
Net Income / Average total assets
Dupont return on assets:
Profit margin X Asset turnover
