Final (1) Flashcards
Return on Equity (ROE)
Profitability ratio.
Return on Assets (ROA)
Profitability ratio.
DuPont Equation
Breaks ROE down into sources of profitability
Profit Margin
Profitability ratio.
Quick Ratio/Acid-Test Ratio
Liquidity ratio. Measures the ability to meet short-term liabilities using short-term assets. More conservative than the current ratio because it excludes inventories from short-term assets. Also known as the Acid-Test Ratio.
Current Ratio
Liquidity ratio. Measures the ability to meet short-term liabilities using short-term assets.
Debt Ratio
Leverage ratio. Measures the percentage of assets financed by debt
Equity Multiplier
Leverage ratio. Increased use of debt will result in more assets for a given amount of equity. Part of the DuPont equation.
Inventory Turnover Ratio
Efficiency ratio. Measures how efficiently inventories are managed (using fewer inventories for the same amount of sales is better)
Asset Turnover
Efficiency ratio. Measures how efficiently assets are used.
Sometimes will use sales instead of revenue.
Interest Coverage Ratio
Leverage ratio. Measures ability to make interest payments on
debt from operating income.
Dividend Payout Ratio
Fraction of earnings paid to investors as dividends.
Retention Ratio (Plowback Ratio)
Fraction of earnings reinvested in the company.
Price-Earnings Ratio (P/E Ratio)
Valuation ratio. Cost of stock per dollar of earnings.
PEG Ratio
Valuation ratio. Relates a company’s P/E ratio to its earnings
growth rate. g is measured as a percentage.
