Module 3 Flashcards
Business plan
Current assets divided by current liabilities
Current ratio
Quick assets divided by current liabilities
Acid test ratio
Measures how efficiently a firm is utilizing its assets
Activity analysis
Measures how many times per year receivables are collected
Accounts receivable turnover
Measures the average time required to collect receivables
Age of accounts receivable
The number of times the average inventory has been sold or used up during a period
Inventory turnover
Measures the average time required to sell inventory
Age of inventory
Provides evidence concerning the earnings potential of a company and how effectively the firm is being managed
Profitability analysis
Net income divided by net sales
Profit margin
Gross profit divided by net sales
Gross profit percentage
Earnings before interest, taxes, depreciation, and amortization (EBIT-DA)
Cash flow calculation
Formal financial statement which presents the income, expenses, and resulting net profit or net loss
Income statement
The difference between gross profit and expenses when gross profit is larger
Net income (net profit)
The difference between gross profit and expenses when expenses are larger
Net loss
Statement that shows beginning capital, change in capital, and ending capital
Statement of owners equity
Formal financial statement illustrating the assets, liabilities, and owners equity of a business as of a specific date
Balance sheet
The point at which total sales equals total costs
Break even analysis
Net sales minus the cost of goods sold
Gross profit (gross margin)
Purchases minus purchases returns and allowances minus purchase discounts
Net purchase
Sales minus sales returns/allowances minus sales discounts
Net sales
