Financial analysis techniques Flashcards
Reading 37
Inventory turnover
activity : cost of goods sold / average inventory
Receivables turnover
activity : revenue / average receivables
Total asset turnover
activity : total revenue / average total assets
Working capital turnover
activity : revenue / average working capital
Fixed asset turnover
activity : revenue / average net fixed assets
Days of inventory on hand (DOH)
activity : number of days in a period / inventory turnover
Days of sales outstanding (DSO)
activity : number of days in a period / receivables turnover
Current ratio
liquidity : current assets / current liabilities
Quick ratio
liquidity : (cash + short term investments + receivables) / current liabilities
Cash ratio
liquidity : (cash + short term investments) / current liabilities
Cash conversion cycle (net operating cycle)
liquidity : DOH + DSO - Number of days of payables
Defensive interval ratio
liquidity : (cash+ short term investments + receivables) / daily cash expenditures
Debt to asset ratio
solvency : total debt / total assets
Debt to capital ratio
solvency : total debt / (total debt + total shareholder’s equity)
Debt to equity ratio
solvency : total debt / total shareholder’s equity
Financial leverage
solvency : average total assets / average total equity
Gross profit margin
profitability : gross profit / revenue
Operating profit margin
profitability : operating profit / total revenue
Net profit margin
profitability : net profit / total revenue
Pretax margin
profitability : earnings before tax / total revenue
Operating ROA
profitability : operating income / average total assets
Return on assets (ROA)
profitability : net income / average total assets
Return on capital
profitability : net income / (average interest bearing debt + average total equity)
Return on equity (ROE)
profitability : net income / average shareholders equity
