Ratios Flashcards
Working Capital
Current assets - current liabilities
ability to pay maturing obligations
current ratio
current assets / current liabilities
ability to meet short-term obligations
acid-test (quick) ratio
cash + cash equivalents + marketable securities + Net receivables / Current liabilites
(numerators is basically CA - inventory
Cash Ratio
Cash + CE+ Marketable securities (CA - Inv - AR) / Current liabilities
more conservative than quick ratio
Accounts receivable turnover
Net credit sales / AVG net receivables
AR turnover in days
Avg net receivables / net credit sales / 365
Inventory turnover
COGS / AVG inventory
Inventory turnover in days (inventory conversion period)
AVF inventory / COGS / 365
Operating Cycle
AR turnover in days + inventory turnover in days
indicates # of days between acquisition of inventory and realization of cash from selling inventory
working capital turnover
sales / average working capital
How effectively capital is used
Total asset turnover
net sales / avg total assets
net profit margin
Net income / net sales
return on total assets
NI / avg total assets
DuPont return on assets
Net profit margin X total asset turnover
Explains why - drivers
return on common equity ( total eqiity - preferred E)
Net income - preferred dividends / AVG common equity
