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
Price to Book value
A valuation ratio calculated as price per share divided by book value per share
Price to cash flow
Price per share / cash flow per share
Price to earnings ratio
Valuation ratio: price per share / earnings per share
Price to sales
A valuation ratio calculated as price per share divide by sales per share
Profitability ratio
Ratios that measure a companies ability to generate profitable sales from its resources (assets)
ROA
Net income / average total assets
ROE
Net income / average equity
Return on total capital
EBIT / sum of short/long term debt and equity
Solvency
The ability of a company to fulfill its long term obligations.
Solvency ratios
Ratios that measure a companies ability to meet its long term obligations
Sustainable growth rate
The rate of dividend (and earnings) growth that can be sustained over time for a given level of ROE, keeping the capital structure constant without issuing common stock
Valuation ratios
Ratios that measure the quantity of an asset or flow (earnings) in relation to the price associated with a specific claim
Vertical analysis
Period analysis using only one reporting period or base statement; for ex an income statement in which all items are stated as a percentage of sales
Working capital
CA-CL
