CMA Exam: Study Unit #2 Flashcards
Current Assets
- Cash and equivalents
- Securities
- Net Acct Rec.
- Inventories
- Prepaid expenses
Current Liabilities
- Accounts Payable
- Notes Payable
- Current Maturities on LT debt
- Unearned Revenue
- Accrued Salary & Wages
- Taxes Payable
- Other Accruals
Liquidity Ratios
- Current Ratio
- Quick Ratio
- Cash Ratio
- CF Ratio
- NWC
- NWC Ratio
Liquidity Ratio
Current Ratio
CA/CL
Liquidity Ratio
Quick Acid-Test Ratio
CA-Inv-Pre/CL
Liquidity Ratio
Cash Ratio
CA+Sec/CL
Liquidity Ratio
CF Ratio
CF. Op/CL
Liquidity Ratio
NWC
CA-CL
Liquidity Ratio
NWC Ratio
CA-CL/TA
Activity Ratios
- A/R Turnover
- Days Sales in A/R
- Inventory Turnover
- Days Sales in Inventory
- A/P Turnover
- Days Sales in Purchases
- Operating Cycle
- Cash Cycle
- Total Asset Turnover
- Fixed Asset Turnover
Actvity Ratios
A/R Turnover
NCS/Avg A/R
Actvity Ratios
Day Sales Outstanding in Inventory Ratio
365 / Accounts Receivable Turnover Ratio
Actvity Ratios
Inventory Ratio
COGS / Avg Inv
Actvity Ratios
DSiI Ratio
365 / Inventory Ratio
Actvity Ratios
A/P Turnover
Net Purchases / Avg A/P
Actvity Ratios
Days Purchases in A/P
365 / Accounts Payable Turnover
Actvity Ratios
Operating Cycle
Days Sales in A/R + Days Sales in Inventory
Actvity Ratios
Cash Cycle
Operating Cycle - Days Purchaes in A/P
Actvity Ratios
Total Asset Turnover
Net Sales/Avg TA
Actvity Ratios
Fixed Assest TR
Net Sales/Avg P.P.E
Solvency Ratios
Capital Structure Ratios
- Total Debt to Total Capital
- Debt to Equity
- LT Debt to Equity
- Debt to TA
Earnings Coverage
- Interest Earned
- Earnings to Fixed Charges
- Cash Flow to Fixed Charges
Solvency Ratios
Total Debt to Total Cap
Total Debt / Total Captial
Measures the % of the firm’s capital structure provided by creditors.
When ratio is low, more capital is supplied by stock holders.
Solvency Ratios
Debt to Equity Ratio
Total Debpt / Stockholder’s Equity
Direct comparison of firm’s debt load vs. its equity stake
Lower ratio means lower relative debt burden, thus better changes of repaying creditors
Solvency Ratios
LT Debt to Equity
Long-term Debt / Stockholders’ Equity
Long-term debt burden carried by company per dollar of equity.
Low ratio - firm will have easier time raising new debt since its low debt load makes it a good credit risk
Solvency Ratios
Debt to TA Ratio (Debt Ratio)
Total Liabilities / Total Assets
Total debt burden carried per dollar of assets
is the same as the Total Debt to Total Capital.
(Capital = Liabilties + Equity, which = Assets)
Solvency Ratios
Times Interest Earned Ratio
EBIT / IE
Ability to pay interest on debt obligations.
Higher ratio = better financial position
Solvency Ratios
Earnings to Fixed Charges Ratio
EBIT + IOL / IE + IOL + Div PS
Solvency Ratios
CF to Fixed Charges Ratio
Pt OCF / IE + IOL + Div PS
Fixed Charges
Interest Expense +
Interest Portion of Operating Leases +
Dividends on Preferred Stock
Leverage Ratios
- DoL
- DOpL SPV
- DOPL %
- DFL SPV
- DFL %
Leverage Ratios
Degree of Leverage (DL)
Pre Fixed Cost Income / Post Fixed Cost Income
Leverage Ratios
Degree of Operating Leverage (DOL) SPV
CM / OI or EBIT
Leverage Ratios
Degree of Operating Leverage (DOL) % Change
% Change OI or EBIT / % Change Sales
Leverage Ratios
Degree of Fin Leverage (DFL) SPV
EBIT / EBT
Leverage Ratios
Degree of Fin Leverage (DFL) % Change
% Change NI / % Change EBIT
Effect of Ratio if > 1 and equal decreases in numerator & denominator?
Ratio Increases
Ratio decreases if vice versa
