financial statement ratios Flashcards
Acid Test
Cash and Near Cash / Current Liabilities
measures ability to meet current Debt
rule of thumb 1 to 1
Current Ratio
Current Assest / Current Liabilities
Another measure of ability to meet current obligations. rule of thumb is 2 to 1
Recievables Turnover
Sales / Recievables
Measures effectiveness of credit and collection policies.
Days Recievables
30 / Recievables Turnover
A way to see on average how long a recievable takes to collection.
Inventory Turnover
Cost of Goods Sold / Average Inventory
A measure of how well inventory is managed
Days Inventory
30 / Inventory turnover
Gross Margin Rate
Gross Margin / Sales
Net Profit Rate
Net Profit / Sales
An overall batting average
Return on Investment (ROI)
Net Profit / Net Worth
Profitability ratio
A high ROI means the investment gains compare favorably to investment cost
Return on Assests (ROA)
Net Profit / Total Assets
percentage shows how profitable a company’s assets are in generating revenue.
Quick Ratio
Current Assets - Inventory / Current Liabilities
A measure of liquidity that doesn’t include inventory
Cash ratio
Cash + Marketable Securities / Current Liabilities
A measure of illiquidity that excludes all assets except cash and cash equivalents
Debt Ratio
Total Debt / Total Assets
Debt-to-equity-ratio
Total Debt / Total Equity
Interest Coverage
EBIT/ Interest Charges
EBIT= Earnings before Interest and Taxes
