Financial Ratios Flashcards
Current Ratio
Current Assets/Current Liabilities
Most common measure of liquidity (Assets = cash AFS securities, AR(net), Notes Rcvb, Inventory, Prepaid Expenses) Liabilities = AP, Notes PYBL, Accrued Interest on Note, Current Maturities, Accrued Salaries and Wages, Taxes payable)
Quick (acid-test) Ratio
Cash and equivalents + Marketable securities + Net receivables/Current liabilities
Effects of Transaction with Equal changes to NUM and DENOM on Ratios
Factor Ratio < 1 Ratio >1
Increase + -
Decrease - +
A/R Turnover
Net credit sales / Average balance in receivable (net)
Days’ sales in receivables
Days in year / AR Turnover Ratio
Inventory turnover
COGS / AVG Balance in Inventory (BEG+END/2)
Days’ Sales in Inventory
Days in year / Inventory Turnover Ratio
Operating cycle
Days’ sales in receivables + Days’ sales in inventory
Cash conversion cycle
Average collection period + Days’ sales in inventory - Average payables period
A/P Turnover
COGS / AVG Balance in AP
Average Payable period
Days in year / AP Turnover
Total Assets Turnover
Net total sales / Average total assets
Fixed asset turnover
Net total sales / average net fixed assets
Debt-to-equity ratio
Total liabilities / Total equity
Times-interest-earned ratio
Earnings before interest and taxes / interest expense
