F2- M8 - Ratio Analysis Flashcards
________ are financial indicators that distill relevant information about a business entity by quantifying the relationship among selected items on the financial statements.
Ratios
An entity’s ratios may be compared with ratios ____________. An entity’s ratios may also be compared with _______________.
1) ratios of a different period of that entity, 2) compared with competitor ratios and industry ratios.
________ ratios are measures of a firm’s short-term ability to pay maturing obligations.
Liquidity
_________ratios are measures of how effectively an enterprise is using its assets.
Activity Ratios
___________ratios are measures of the success or failure of an enterprise for a given time period.
Profitability Ratios
_______ ratios are measures of security or protection for long-term creditors/investors.
Coverage Ratios
What are the limitations for ratios
they depend entirely on the reliability of the data on which is based on server factors (such as historical cost, estimates)
What is the formula for Current Ratio
Current Assets - Current Liabilities
What is the formula for Quick Ratio
Current Assets - Inv - Prepaids/ Current Liabilities
What is the formula for A/R Turnover
Net Sales (Sales - Returns)/ Avg net A/R (Beg + ending/2)
What is the formula for days in A/R
Ending Net AR/ Net Sales
What is the formula for days in Inventory Turnover
COGS/ Average Inventory
What is the formula for days in Days in Inventory
Ending Inventory/ COGS/365
What is the formula for AP Turn over
COGS/Average AP
What is the formula for days in Payables outstanding
Ending AP/ COGS/365
