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))
return on stockholder equity
net income / total stockholder equity, after tax profit per dollar of stock holder investment in the firm
earning per share
net income / number of shares of common stock outstanding, earning available to the owners of common stock
price earning ratio
market price per share/ earnings per share, attractiveness of firm on equity markets
Liquidity ratio
measures a firms ability to meet maturing short term obligations
Leverage ratio
measures the extent to which a firm has been financed by debt
activity ratios
measure how effectively a firm is using its resources
profitability ratios
measures managements overall effectiveness as shown by the returns generates on sales and investment
the strategic management processes
strategy formulation, strategy implementation, and strategy evaluation
purpose of strategic managment
to exploit and create new and different opportunities, and also gaining and maintaining a competitive advantage
