FR&A Analysis Techniques Flashcards
Activity Ratios
Ratios that measure how efficiently a company performs day-to-day tasks, such as the collection of receivables and management of inventory
Asset Utilization Ratios
Ratios that measure how efficiently a comparing performs day to day tasks such as the collection or receivables and the management of inventory in the
Basic EPS
Net earnings available to common shareholders (net income - preferred dividends) divided by the weighted average of shares outstanding
Cash conversion cycle
DOH + DOS - Days in Payables
Credit Analysis
The evaluation of credit risk; the evaluation of the creditworthiness of a borrower or counterparty
Credit risk
The risk of loss caused by a counterparties or debtors failure to make a promised payment
Debt to Assets Ratio
A solvency ratio calculated as total debt divided by total assets
Debt to capital ratio
A solvency ratio calculated as total debt divided by capital (debt + oe)
Debt to Equity Ratio
A solvency ratio calculated as total debt divided by shareholders equity
Defensive interval ratio
Liquidity ratio that estimates say an entity could meet cash needs. Cash + Marketable securities + receivables/ divided by daily cash expense
Dividend Payout Ratio
The ratio of cash dividends paid to earnings for a given period
DuPont Analysis
Decomposing ROE as the product of other financial ratios
Financial Leverage
Operating income / Debt
Financial Leverage Ratio
Avg Total assets/ average total equity
Fixed charge coverage
Solvency ratio: EBIT + lease payments / interest payments + lease payments
Gross profit margin
The ratio of gross profit to revenues
Horizontal Analysis
Common size analysis that involves comparing a specific financial statement with that statement in prior or future time periods; also cross-sectional analysis between companies
Interest coverage
Solvency ratio; EBIT/ interest payments
Liquidity Ratios
Financial ratios measuring the company’s ability to meet its short term obligations
Net profit margin
Net income / revenue
Operating efficiency ratios
Ratios that measure how efficiently a company performs day to days tasks, such as the collection of receivables and management of inventory
Operating Leverage
The use of fixed cost in operations
Operating profit margin
A profitability ratio calculated as operating income (income before interest and taxes ) divided by revenue
Pretax margin
A profitability ratio calculated as EBT/ revenue
