F2M7

Question 1

Ratios are financial indicators that distill ___ information about a business entity

Answer 1

Relevant

Question 2

Horizontal analysis

Answer 2

period to period comparison

Question 3

Vertical analysis

Answer 3

to industry by comparing ratios in the other statements

Question 4

Current Ratio

Answer 4

CA/CL

Question 5

Quick Ratio

Answer 5

(CA-inventory)/Cl

Question 6

With turnovers the __ the better

Answer 6

higher

Question 7

A/R turnover

Answer 7

Sales / Average accounts receivable

Question 8

Days in A/R

Answer 8

365 / sales/ending ar

Question 9

Inventory turnover

Answer 9

COGS/ average inventory

Question 10

Days in inventory

Answer 10

365/sales/ending inventory

Question 11

A/P turnover

Answer 11

COGS/ average ap

Question 12

Days in A/P outstanding

Answer 12

365/cogs/ending ap

Question 13

What does the cash conversion cycle measure

Answer 13

core business generating revenue

Question 14

Cash conversion cycle formula

Answer 14

days in a/r + days in inventory - days in a/p

Question 15

What does asset turnover measure

Answer 15

effective asset use

too high would have unneeded resources and too low would be loosing sales

Question 16

Asset turnover formual

Answer 16

sales/ average total assset

Question 17

Do you use gross or net sales for turnover?

Answer 17

net (meaning minus returns and discounts)

Question 18

Profit margin calc

Answer 18

net income/ net sales

Question 19

ROA measures

Answer 19

turning assets into profit

Question 20

DuPont ROA

Answer 20

same as regular ROA, but breaks it down

Question 21

Return on Equity meaning

Answer 21

higher than the required rate, is it sustainable

Question 22

Return on Equity formula

Answer 22

net income/ avg. total equity

Question 23

Return on sales formula

Answer 23

EBIT/sales

EBIT= sales-COGS-S&GA-Dep

Question 24

Return on sales meaning

Answer 24

operating margin but excludes the degree of financial leverage

Question 25

Gross profit margin

Answer 25

sales - COGS / sales

Question 26

Operating cash flow measures

Answer 26

core business

Question 27

operating cash flow formula

Answer 27

cash flow from operations/current liabilities

Question 28

Coverage ratios measure

Answer 28

long term risk and capital structure

Question 29

Debt to equity formula

Answer 29

liabilities/equity

Question 30

Debt to equity measures

Answer 30

pros and cons for borrowing

high debt means lower equity

use accounting equation to better help understand

Question 31

Total debt ratio formula

Answer 31

total liabilities/total asset

as total debt increases, risk increases

Question 32

Equity Multiplier formula

Answer 32

total assets/total equity

Question 33

Times interest earned

Answer 33

EBIT/interest expense

covers ability to cover interest charges

Question 34

EPS formula

Answer 34

(NI-PD) / weighted avg common shares outstanding

Question 35

PE ratio

Answer 35

price per share / basic earnings per share

Question 36

Dividend payout meaning

Answer 36

if payout is low, they may be investing in the company for growth

if it is high, then you will have dividend returns

Question 37

Dividend payout formula

Answer 37

share value / net income

Question 38

Retention dividend payout

Answer 38

1 - dividend payout

Question 39

working capital

Answer 39

current assets - current liabilities

Question 40

Net profit

Answer 40

net income / net sales

Question 41

COGS

Answer 41

beginning inventory + purchases - ending inventory