Financial Ratios (FINALS) Flashcards
The extent to which a firm can meet its short-term obligations
Current Assets/Current Liabilities
Current Ratio
The extent to which a firm can meet its short-term obligations without relying upon the sale of its inventories
Currents Assets minus Inventory/Current Liabilities
Quick Ratio
The percentage of total funds that are provided by creditors
Total Debt/Total Assets
Debt-to-Total-Assets Ratio
The percentage of total funds provided by creditors versus by owners
Total Debt/Total Stockholders’ Equity
Debt-to-Equity Ratio
The balance between debt and equity in a firm’s long-term capital structure
Long-term Debt/Total Stockholders’ Equity
Long-Term Debt-to-Equity Ratio
The extent to which earnings can decline without the firm becoming unable to meet its annual interest costs
Profits Before Interest and Taxes/Total Interest Charges
Times-Interest-Earned Ratio
Whether a firm holds excessive stocks of inventories and whether a firm is slowly selling its inventories compared to the industry average
Sales/Inventory of Finished Goods
Inventory Turnover
Sales productivity and plant and equipment utilization
Sales/Fixed Assets
Fixed Assets Turnover
Whether a firm is generating a sufficient volume of business for the size of its asset investment
Sales/Total Assets
Total Assets Turnover
The average length of time it takes a firm to collect credit sales (in percentage terms)
Annual Credit Sales/Accounts Receivable
Accounts Receivable Turnover
The average length of time it takes a firm to collect on credit sales (in days)
Accounts Receivable/Total Credit Sales/365 days
Average Collection Period
The total margin available to cover operating expenses and yield a profit
Sales minus COGS/Sales
Gross Profit Margin
Profitability without concern for taxes and interest
Earnings Before Interest and Taxes (EBIT)/Sales
Operating Profit Margin
After-tax profits per dollar of sales
Net Income/Sales
Net Profit Margin
After-tax profits per dollar of assets; this ratio is also called return on investment (ROI)
Net Income/Total Assets
Return on Total Assets (ROA)
