Lecture 3.2 Flashcards
the ratio of on financial statement item to another
Financial ratio
choosing an objective measure of normal or typical in order to assess if a value is too high or too low
benchmarking
firms that resemble the analyzed form such as firms of a similar size , industry, geographic region etc.
Comps
investing in stocks that have low valuation ratios
Value investing
liquidity ratio called current ratio
CA/CL
liquidity ratio called quick ratio
CA - Inventory / CL
Liquidity ratio called cash ratio
Cash/CL
Liquidity ratio called Net working capital - to -total assets
NWC/Assets
Liquidity Ratio called interval measure
CA/ (COGS/365)
Solvency Ratio called total debt ratio
Debt/Assets
Solvency Ratio called Debt Equity ratio
debt/equity
Solvency ratio that is called equity multiplier
assets /equity
Long -term solvency ratio called TIE ratio
EBIT/Interest
Long -term solvency ratio called the Cash Coverage Ratio
EBIT + depreciation /Interest
Inventory Turnover ratio
COGS/Inventory
