FAR 2 Flashcards
working capital
current assets - current liabilities
current ratio
current assets/current liabilities
AR turnover
net credit sales/average net receivables
indicates receivable quality and how successful firm is at collecting receivables
AR turnover in days
365/AR turnover
inventory turnover
COGS/average inventory
how successful is the firm selling inventory
inventory turnover in days
365/inventory turn
operating cycle
AR turn in days and Inventory turn in days
collect quickly and sell quickly
working capital turn
sales/average working capital
how effectively working capital is being used to generate sales
total asset turnover
net sales/average total assets
how effective firm uses its assets to generate sales
Net profit margin
net income/net sales
shows profit rate
return on total assets
net income/ average total assets
dupont ROA
Net income/net sales * Net sales/avg total assets
shows the drivers of ROA
debt to equity
total liab/common stockholders equity
the lower the better
debt to assets
=total liab/total assets
shows out of all the assets, how much of it is funded by debt
times interest earned
EBIT/interest
shows ability of income to cover interest expenses
