Ratios Flashcards
Current Ratio
Current Assets
(Cash + AR + Inventory) / Current Liabilities
Does the Acid Test include Pre-Paid?
No
Average Collection Period
360/Accounts Receivable Turnover
Accounts Receivable Turnover
Net Credit Sales / Average Net Accounts Receivable
Average Net Accounts Receivable
(Beginning A/R + Ending AR)/2
Quick Ratio
Cash + AR + Marketable Securities / Current Liabilities
Working Capital
Current Assets - Current Liabilities
Times Interest Earned
(Net Income before Interest Expense and Income Tax Expense) / Interest Expense
Accounts Receivable Turnover
Net Credit Sales / Average AR
Number of Days in AR
365 / AR Turnover
Inventory Turnover
COGS / Average Inventory
Number of Days in Inventory
365 / Inventory Turnover
Basic Inventory Equation
Beginning Inventory + Purchases = Ending Inventory + COGS
Which Inventory Costing Method will produce lower inventory turnover ratio in an inflationary economy?
First in First Out
Average Days’ Sales in Inventory
365 / Inventory Turnover
