ratios

Question 1

Working Capital= positive working capital means that the company is more likely to pay its liabilities

Answer 1

current assets-current liabilities

Liquidity

Question 2

Current Ratio= for every dollar of current liabilities how much current assets are there?

Answer 2

Current Assets/current liabilities

Question 3

current cash debt coverage ratio= is the company generating sufficient cash provided by operating activities to meet current obligations?

Answer 3

cash provided by operations/average current liabs

Liquidity

Question 4

Inventory turnover= higher inventory turnover means that the company is reducing the amount of inventory on hand relative to cogs

Answer 4

COGS/average inventory

Liquidity

Question 5

days in inventory=lower average days means the company is reducing the amount of inventory on hand

Answer 5

365/inventory turnover

Liquidity

Question 6

receivables turnover= are collections being made in a timely fashion?

Answer 6

Net credit sales/average net receivables

Liquidity

Question 7

average collection period= should be consistent with corporate credit policy. increase suggests a decline in financial health of customers.

Answer 7

365/receivables turnover

Liquidity

Question 8

Debt to total assets= measure the percentage of financing provided by creditors rather than stockholders

Answer 8

total liabilities/total assets

solvency

Question 9

Cash debt coverage= is a company generating sufficient cash from operations to meet long term obligations?

Answer 9

cash provided by operations/Average total liabilities

solvency

Question 10

Times interest earned ratio= high ratio suggests ability to meet interest payments as scheduled

Answer 10

(Net Income+Interest Expense+Tax expense)/Interest expense

solvency

Question 11

Free Cash Flow= how much cash the company generated to pay off debts, expand operations, and distribute dividends

Answer 11

Cash from operations-CAPEX-Cash Div

solvency

Question 12

Earnings Per Share= how does a companies earnings performance compare with that of previous years?

Answer 12

Net Income-Preffered Stock DIvidends/ Average common shares outstanding

Profitability

Question 13

Price Earnings Ratio= investors assessment of a company’s future earnings.

Answer 13

Stock price per share/ earnings per share

Profitability

Question 14

Gross Profit Rate= higher ratio suggests the margin between selling price and inventory cost is increasing. too high might lose sales

Answer 14

Gross Profit/Net Sales

Profitability

Question 15

Profit Margin ratio= higher value suggests favorable return on each dollar of sales

Answer 15

Net income/ Net sales

Profitability

Question 16

Return on Assets= higher value suggests favorable efficiency (use of assets)

Answer 16

Net income/ average total assets

Profitability

Question 17

Asset Turnover ratio= indicates the sales dollars per dollar of assets. higher value suggests the company is effective in generating sales.

Answer 17

net sales/ average total assets

Profitability

Question 18

Payout Ratio= what portion of its earnings does a company pay out in dividends

Answer 18

Cash dividends declared on common stock/ Net Income

Profitability

Question 19

Return on common stockholders equity= high measure suggests strong earnings performance from common stockholders perspective

Answer 19

Net Income-Preffered stock dividends/ Average common stockholders equity

Profitability

Question 20

COGS

Answer 20

Beginning inventory+COGP-Ending Inventory

Question 21

Retained Earnings

Answer 21

RE beginning+Net Income-Dividends

Question 22

COGAS

Answer 22

Beginning inventory+COGP