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Accounting > Financial Ratios > Flashcards

Financial Ratios Flashcards

1
Q

Acid-Test Ratio
(Liquidity)

A

( Current Assets - Inventories ) / Current Liabilities

The acid-test ratio measures a company’s ability to pay off short term liabilities with quick assets.

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2
Q

Cash Ratio
(Liquidity)

A

( Cash & Cash Equivalents ) / Current Liabilities

The cash ratio measures a company’s ability to pay off short term liabilities with cash and cash equivalents.

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3
Q

Operating Cash Flow Ratio
(Liquidity)

A

Operating Cash Flow / Current Liabilities

This ratio is a measure of the number of times a company can pay off current liabilities with cash generated in a given period.

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4
Q

Activity (Efficiency) Ratios

A

Activity (efficiency) ratios are used to measure how well a company is utilizing its assets and resources.

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5
Q

Asset Turnover Ratio
(Efficiency)

A

Net Sales / Total Assets

The asset turnover ratio measures a company’s ability to generate sales from assets.

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6
Q

Inventory Turnover Ratio
(Efficiency)

A

Cost of Goods Sold / Average Inventory

The inventory turnover ratio measures how many times a company’s inventory is sold and replaced over a given period.

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7
Q

Receivables Turnover Ratio
(Efficiency)

A

Net Credit Sales / Average Accounts Receivable

The accounts receivable turnover ratio measures how many times a company can turn receivables into cash over a given period.

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8
Q

Days Sales In Inventory Ratio
(Efficiency)

A

365 Days / Inventory Turnover Ratio

The days sales in inventory ratio measures the average number of days that a company hold on to inventory before selling it to customers.

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9
Q

Debt (Leverage) Ratios

A

Debt (leverage) ratios measure the extent to which an organization uses debt to fund its operations, and its ability to repay it.

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10
Q

Debt Ratio
(Leverage)

A

Total Liabilities / Total Assets

The debt ratio measures the relative amount of a company’s assets that derive from debt.

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11
Q

Debt to Equity Ratio
(Leverage)

A

Total Liabilities / Shareholder Equity

The debt to equity ratio calculates the weight of total debt and financial liabilities against shareholders’ equity.

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12
Q

Interest Coverage Ratio
(Leverage)

A

Operating Income / Interest Expenses

The interest coverage ratio shows how easily a company can [ay its interest expense.

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13
Q

Debt Service Coverage Ratio
(Leverage)

A

Operating Income / Total Debt Service

The debt service coverage ratio reveals how easily a company can pay its debt obligations.

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14
Q

Profitability Ratios
(Profitability)

A

Profitability ratios determine the ability of the company to generate profits relative to their sales, operating costs, and assets.

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15
Q

Gross Profitability Ratio
(Profitability)

A

Gross Profits / Net Sales

The gross profit ratio measures the margin on sales the company is achieving.

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16
Q

Net Profitability Ratio
(Profitability)

A

Net Income / Net Sale

The net profitability ratio measures the overall profitability of the company, or how much is contributed to the bottom line.

17
Q

Return on Assets Ratio
(Profitability)

A

Net Income / Total Assets

The return on assets ratio indicates how effectively the company is deploying assets.

18
Q

Return on Investment Ratio
(Profitability)

A

Net Income / Owners’ Equity

The return on investment ratio indicates how well the company is utilizing its equity investment.

19
Q

Market Value Ratios
(Market Value)

A

Market value ratios are used to evaluate the share price of a stock.

20
Q

Book Value Per Share Ratio
(Market Value)

A

Shareholder’s Equity / Total Shares Outstanding

The book value per share ratio calculates the per-share value of a company based on equity available to shareholders.

21
Q

Dividend Yield Ratio
(Market Value)

A

Dividend Per Share / Share Price

The dividend yield ratio measures the amount of dividend attributed to shareholders relative to the market value per share.

22
Q

Earnings Per Share Ratio
(Market Value)

A

Net Earnings / Total Shares Outstanding

The earnings per share ratio measures the amount of net income earned for each share outstanding.

23
Q

Price-Earnings Ratio
(Market Value)

A

Share Price / Earnings Per Share

The price-earnings ratio compares a company’s share price to its earnings per share.

24
Q

Current Ratio
(Liquidity)

A

Current Assets / Current Liabilities

The current ratio measures a company’s ability to pay off short-term liabilities with current assets.

Accounting (4 decks)

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