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rtws > ratio analysis > Flashcards

ratio analysis Flashcards

1
Q

Receivables turnover

A

ACTIVITY RATIO
- how quickly a company turns its accounts receivable into cash
CALCULATION: Revenue / average receivables

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2
Q

Days Sales Outstanding

A

ACTIVITY RATIO
- average # of days it takes a company to receive payment for a sale (HIGH = company experiencing delays in receiving payments)
CALCULATION: 365 / receivables turnover

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3
Q

Days of inventory on hand

A

ACTIVITY RATIO
- average # of days it takes a company to sell inventory stock
CALCULATION: 365 / inventory turnover

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4
Q

Payables turnover

A

ACTIVITY RATIO
- how quickly a company can pay off its suppliers
CALCULATION: COGS / average accounts payable

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5
Q

Working capital turnover

A

ACTIVITY RATIO
- how well a company uses its working capital to generate revenue
CALCULATION: revenue / average working capital

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6
Q

Total asset turnover

A

ACTIVITY RATIO
- how well a company uses its assets to generate revenue
CALCULATION: revenue / average total assets

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7
Q

Number of days payable

A

ACTIVITY RATIO
- # of days it takes a company to pay off its suppliers
CALCULATION: 365 / payables turnover

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8
Q

Current ratio

A

LIQUIDITY RATIO
-can company meet its short term liabilities?
- current assets / current liabilities

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9
Q

Quick ratio

A

LIQUIDITY RATIO
- can company meet its short term obligations with most liquid assets?
- cash + marketable investments + receivables / current liabilities (NO INVENTORY)

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10
Q

Debt-to-equity ratio

A

DEBT RATIO
-how much financing is done through debt vs. equity (HIGH = more debt)
- total debt/total equity

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11
Q

Debt-to-assets ratio

A

DEBT RATIO
- how much of a company’s assets are funded by debt
-total debt/total assets

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12
Q

Debt-to-capital ratio

A

DEBT RATIO
-total debt/total capital (debt + equity)

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13
Q

Financial leverage ratio

A

DEBT RATIO
- how much of a company’s capital comes from debt
- average total assets / average total equity

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14
Q

DEBT vs COVERAGE ratio

A

DEBT - measure the amount of debt capital to equity capital (BALANCE SHEET)
- DEBT = short term + long term debt
COVERAGE - company’s ability to cover interest payments (INCOME STATEMENT)

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15
Q

Interest Coverage

A

COVERAGE RATIO
- how well they can pay interest on debt
EBITDA / cash interest payments

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16
Q

Fixed charge coverage

A

COVERAGE RATIO
- how well they can pay their fixed expenses
EBITDA - Capex - cash taxes / (cash interest + scheduled amortization)

17
Q

Gross profit margin

A

PROFITABILITY RATIO
- Reflects input costs, pricing power over customers and product mix
-Gross profit/revenue

18
Q

Operating profit margin

A

PROFITABILITY RATIO
- Ability of firm to control operating costs and overhead
- EBIT / revenue

19
Q

Pretax margin

A

PROFITABILITY RATIO
- Reflects the effects on profitability of leverage and other (non-operating) income and expenses
- EBT/revenue

20
Q

Net profit margin

A

PROFITABILITY RATIO
- Maybe adjusted for non-recurring items
- net income/revenue

21
Q

Return on total capital

A

PROFITABILITY RATIO
- EBIT / average total capital

22
Q

Return on equity

A

PROFITABILITY RATIO
- Net income / average total equity

23
Q

Return in common equity

A

PROFITABILITY RATIO
- net income – preferred dividends/average common equity

24
Q

Operating return on assets

A

PROFITABILITY RATIO
Operating income / average total assets

25
Q

Return on assets (ROA)

A

PROFITABILITY RATIO
-Net income / average total assets

26
Q

Inventory turnover

A

INVENTORY ANALYSIS
- COGS / average inventory
- decreasing = problems

27
Q

Gross profit margin

A

INVENTORY ANALYSIS
- Gross profit / total revenue
- Lower # = bad

28
Q

Current ratio

A

INVENTORY ANALYSIS
- Current assets / current liabilities
- Lower # = bad

29
Q

LIQUIDITY vs. SOLVENCY

A

Liquidity = ability to pay off short term debt
Solvency = ability to pay off long term debt

30
Q

DEBT ratios should be: (HIGHER/LOWER) whereas COVERAGE ratios should be: (HIGHER/LOWER)

A
  1. Lower
  2. Higher

rtws (4 decks)

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