Financial Ratios - Uses Flashcards
Current Ratio
Have enough cash?
Quick Ratio (Acid-Test)
Have enough real cash?
Cash Ratio
Really have enough real cash?
Total Debt Ratio
How much debt is in your capital structure?
$ times debt for every $ in assets
Debt-to-Equity Ratio
Another way to compare Total Debt Ratio
Equity Multiplier
Another way to compare Total Debt Ratio from an equity standpoint
Times Interest Earned
How well are interest obligations covered?
Cash Coverage
How well are interest obligations covered on a cash basis?
Inventory Turnover
Inventory management efficiency
higher = more efficient
Days’ Sales in Inventory
How many days for inventory to be sold
Receivables Turnover
Receivables management efficiency
Days’ Sales in Receivables
How long does it take to get the cash?
More meaningful
Total Asset Turnover
Every $ in assets, we generated $ times in sales
Profit Margin
Profit for every $ earned
Operating Margin
Profit before interest & taxes
Return on Assets (ROA)
Profit for every $ of assets
Return on Equity (ROE)
Performance to shareholders
Earnings per Share (EPS)
1 share of stock earned you $ times of value
Price-Earnings Ratio (PE)
Stock price is X times the earnings
Also referred to as the PE multiple
Price-Sales Ratio
Same as PE but uses sales (not as common)
Market-to-Book Ratio
Loosely compares market value of investments to historical cost
