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FAR > Ratios > Flashcards

Ratios Flashcards

1
Q

Current Ratio

A

Current Assets/ Current Liabilities

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2
Q

Quick Ratio

A

Quick Assets/Current Liabilities

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3
Q

Cash Ratio

A

Cash + Marketable Securities/ Current Liabilities

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4
Q

Cashflow Ratio

A

Operating Cashflow/Current liabilities

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5
Q

Working capital

A

Current Assets - Current liabilities

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6
Q

What does the current ratio measure?

A

Whether organization’s current assets can fulfill short term obligations

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7
Q

Quick Assets

A

Cash + Marketable Securities + AR

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8
Q

What do liquidity ratios measure?

A

Firm’s ability to meet current, short term liabilities

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9
Q

What do activity ratios measure?

A

Efficiency in which an organization employs its resources to generate revenue

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10
Q

AR turnover

A

Net Credit Sales/ Average AR

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11
Q

Day Sales in AR (AR collection period)

A

365/AR Turnover

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12
Q

Inventory turnover

A

COGS/Average Inventory

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13
Q

Days Sales in Inventory (Inventory Collection Period)

A

365/Inventory turnover ratio

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14
Q

AP Turnover

A

COGS/Average AP

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15
Q

Day Purchases in AP (AP deferral period)

A

365/AP Turnover ratio

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16
Q

Operating Cycle

A

AR Collection period + Inventory Conversion Period

17
Q

Cash Cycle

A

Operating Cycle - AP Deferral Period

18
Q

Total Asset Turnover

A

Net Sales/ Average Total Assets

19
Q

Fixed Asset Turnover

A

Net Sales/Average Fixed assets

20
Q

Working Capital Turnover Ratio

A

Net Sales/Average Working Capital

21
Q

What does inventory turnover represent?

A

Amount of times inventory is sold or used in a period; measures business efficiency
higher is better

22
Q

What does the inventory conversion period represent?

A

measures the number of days it takes to convert inventory into sales; lower is better because it implies inventory is selling quickly

23
Q

What does AR turnover represent?

A

How efficient an organization is at collecting receivables

24
Q

What does days in AR represent?

A

Average number of days an organization takes to collect AR

25
Q

What does AP turnover represent?

A

How quickly an organization repays creditors

26
Q

What does the operating cycle represent?

A

How many days it takes to convert inventory into cash; operational efficiency
lower is better

27
Q

What does the cash cycle represent?

A

Amount of time between the date of cash expenditures for the production of inventory to the date of cash collection from customers

28
Q

What do profitability ratios measure?

A

organization’s ability to generate profit

29
Q

Gross profit

A

gross profit/net sales

30
Q

Operating profit margin

A

operating income/net sales

31
Q

EBITDA margin

A

EBITDA/Net sales

32
Q
A

FAR (9 decks)

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