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L1 26 Understanding Balance Sheets > I. Calculate and Interpret Liquidity and Solvency Ratios > Flashcards

I. Calculate and Interpret Liquidity and Solvency Ratios Flashcards

Understanding Balance Sheets

1
Q

Liquidity Ratios - measure ability to pay short term L’s

A

Current, quick, cash

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2
Q

Current Ratio

A

CA/CL

CL>CA = illiquid - may come into problems paying back obligations
CA>CL = resources may be used inefficiently
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3
Q

Quick Ratio

A

Cash+Marketable securities+recievables/CL

-Quick ratio excludes inventory

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4
Q

Cash ratio

A

cash+marketable securities/CL

-No inventory, no recievables

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5
Q

Solvency Ratios

A

Long term debt to equity
Total debt to equity
Debt Ratio
Financial Leverage

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6
Q

Long term Debt to Equity

A

Long term debt/Total Equity

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7
Q

In general, what is ‘debt’ regarding a balance sheet?

A

Debt is considered to be any interest bearing obligation

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8
Q

Total Debt to Equity

A

Total Debt/Total Equity

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9
Q

Debt Ratio

A

Total Debt/Total Assets

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10
Q

Financial Leverage

A

Total Assets/Total Equity

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L1 26 Understanding Balance Sheets (9 decks)

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