Exam 1 Flashcards
Current ratio
Liquidity ratio: Current assets/current liability extent in which a firm can meets its short term obligations
Quick ratio
Liquidity ratio: current assets - inventory / current liability, how a firm can meet its short term obligations without relying on its inventory
debt to total asset ratio
total debt/ total asset, percentage of total funds that are provided by creditors
debt to equity ratio
total debt /total stockholders equity the percentage of total funds provided by creditors vs by owners
long term debt to equity ratio
long term debt / total stockholder equity balance between debt and equity in a firms long term capital structure
times interest earned ratio
profits before interest and taxes /total interest charges
inventory turnover ratio
sales / inventory of finished goods, whether a firm holds excessive stock of inventories and whether a firm is slowly selling its inventory compared to the industry average
fixed assets turnover
sales / fixed assets, sales productivity and plant and equipment utlization
total asset turnover
sales / total assets, whether a firm is generating significant volume of business for the size of its assets investment
accounts receivable turnover
annual credit sales / accounts receivable, the average length of time it takes a firm to collect credit sales ( in percentage)
average collection period
accounts receivable / (total credit sales/356 days), the average time it takes for a firm to collect on credit sales
gross profit margin
(sales - cost of goods sold) / sales, the total margin available to cover operating expenses and yield a profit
operating profit margin
earnings before interest and taxes (ebit) / sales ,profitability without concern for taxes and interest
net profit margin
net income / sales, after tax income per dollar in sales
return on total assets ROA
net income / total assets, after tax profit per dollar of assets ( also known as return on investments ROI))
