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Business Strategy > Financial Ratios > Flashcards

Financial Ratios Flashcards

1
Q

Free cash flow

A

Profit after tax + depreciation - capital expenditures - dividends

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2
Q

Days of inventory

A

Inventory / (Cost of good sold/365)

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3
Q

Dividend yield

A

Dividend per share / Market price per share

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4
Q

Debt to equity

A

Total Debt / Total Equity - the balance of a firms debt to shareholder investment

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5
Q

Current Ratio

A

Current assets/ Current liabilities

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6
Q

Total debt to assets ratio

A

Total Debt/Total Assets - measuers how much borrowed funds funds the firm.

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7
Q

Long term debt to capital

A

Long term debt/ (Long-term debt + total shareholder equity) - measure of balance sheet strength and creditworthiness . 025 is good. Everything over 0.5 is worrysome.

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8
Q

Net profit margin

A

Profit after tax/ Sales revenues

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9
Q

Return on stockholders equity

A

Profit after tax/ Total shareholder equity - 12-15 % is good

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10
Q

ROCE or return on invested capital

A

Profit after tax / (Long-term debt + shareholder equity). Measure of return on total monetary investment in company

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11
Q

P/E

A

Price/earnings - 20+ good outlook, 12- bad outlook

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12
Q

Internal cash flow

A

Profit after tax + depreciationn

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13
Q

Debt to equity

A

Debt/equity - shows a firms balance of debt and stockholder investment. Further below 1 is better.

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14
Q

Coverage ratio or times interest earned

A

Operating income/Interest expenses - over 2 mandatory often to lend, 3+ is progressively better

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15
Q

Working capital

A

Current assets - current liabilities

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16
Q

Long-term debt to equity

A

Long term debt/Equity - shows the balance between long term debt and equity in the firms capital structure

17
Q

Inventory turnover rate

A

Cost of good sold/Inventory

18
Q

Average collection period

A

Accounts receivable/(Sales revenues/365)

19
Q

Operating profit (EBIT)

A

Operating income/Sales revenues or sales revenues - operating expense/Sales revenues

20
Q

Gross profit margin

A

Sales revenues - Cost of good sold/Sales revenues

21
Q

Total return on assets

A

Profit after taxes + interest/Total assets - shows return on total investment in company

22
Q

Net return on assets (ROA)

A

Profit after taxes/Total assets

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