Financial Ratios ( CFI quick guide) Flashcards
To remember the key financial ratios, how they are caculated and what they show.
Current Ratio / Working Capital Ratio
Current Assets / Current Liabilities.
Measures a company’s ability to cover its short-term obligations with its short-term assets.
Quick Ratio / Acid Test Ratio
Current Assets - Inventories / Current Liabilities.
Provides insight into a company’s ability to meet short-term obligations without selling inventory.
Cash Ratio
Cash and Cash Equivalents / Current Liabilities.
Assesses a company’s liquidity by comparing its cash reserves to its current liabilities.
Times Interest Earned
Net Operating Income / Interest Expense.
Shows how many times a company can cover its interest charges on pretax earnings.
Capex to Operating Cash Ratio
Capital Expenditures / Operating Cash.
Indicates the proportion of cash flow that is spent on capital investments.
Defensive Interval Ratio
Cash and Cash Equivalents / Daily Operating Expenses.
Measures the number of days a company can operate on its liquid assets without further income.
Operating Cash Flow Ratio
Operating Cash Flow / Current Liabilities.
Indicates how well current liabilities are covered by the cash flow from operations.
Times Interest Earned (Cash Basis) Ratio
Cash Net Operating Income / Interest Expense.
Shows how many times interest expense is covered by cash from operations.
Debt-to-Equity Ratio
Total Debt / Total Equity.
Indicates the relative proportion of shareholders’ equity and debt used to finance a company’s assets.
Equity Ratio
Total Equity / Total Assets.
Shows the proportion of a company’s assets that are financed by shareholders’ equity.
Debt Ratio
Total Debt / Total Assets.
Indicates the percentage of a company’s assets that are financed through debt.
Net Debt to EBITDA
Net Debt / EBITDA.
Measures a company’s ability to pay off its incurred debts.
Accounts Receivable Turnover
Net Credit Sales / Average Accounts Receivable.
Measures how efficiently a company collects revenue from its customers.
Accounts Receivable Days
365 Days / Accounts Receivable Turnover.
Average number of days it takes a company to collect payment after a sale has been made.
Asset Turnover Ratio
Net Sales / Average Total Assets.
Shows how efficiently a company uses its assets to generate sales.
