Ratios Flashcards
Liquidity Ratios
What action increases the quick ratio
Selling inventory at a loss
Net credit sales formula
AR Turnover and AVG AR
Days Sales in AR
Asset Turnover
ROA : Return on assets
Net income / AVG Total Assets
or
Asset Turnover x Profit Margin
Asset Turnover = AVG Total Assets / NetSales
Which costing method results in a lower inventory turnover in an inflationary economy?
FIFO = lower turnover
LIFO = higher turnover
Dividend Pay out ratio
Cash dividends / Net income
ROA
Asset Turnover = Net Sales / AVG Total Assets
TIE - Times interest earned ratio
Payout ratio, DPS, EPS
Inventory Turnover Ratio and Average Inventory
ICP or Average Days Sales in Inventory
Debt-to-equity (D/E) ratio
Price to Earnings Ratio & Basic EPS
Return on Sales
Operating Income / Revenue
What indicates successful use of leverage?
When the rate of return on investments exceeds the cost of debt.
ROE
(Return on common stockholders equity)
avg cs equity = (beg comms + RE + end comms + RE) / 2
Which of the following is not a profitability ratio? Return on Assets, Gross Margin, Operating Profit Margin, Price/Earnings (P/E)
P/E is a market ratio, not a profitability ratio. It reflects how much investors are willing to pay for each dollar of a company’s earnings.
Profitability ratios:
Return on Assets (ROA)
Gross Margin,
Operating Profit Margin
What is the formula for Book Value Per Share?
Operating profit margin
Which ratios are used to derive Return on Investment (ROI)?
Operating cycle
COGS Formula
COGS = Beg Inventory + Purchases − End Inventory
All Turnovers
All Days Formulas
