Ratios - Liquidity/Solvency and Operational Flashcards
What are the general types of ratios?
Liquidity/Solvency;
Operational Activity;
Profitability;
Equity/Investment Leverage.
List the formula for times preferred dividend.
Net Income / Annual Preferred Dividend Obligation.
List the cash availability or interval ratio formula.
(Cash + Net Receivables + Marketable Securities) / Average Daily Cash Expenditures.
List the formula for working capital.
Current Assets - Current Liabilities.
List the formula for number of days’ supply in inventory.
365/ Inventory Turnover.
List the formula for times interest earned.
(Net Income + Interest Expense + Income Tax Expense) / Interest Expense.
List the formula for inventory turnover.
Cost of Goods Sold (COGS) / Average Inventory.
List the formula for the Acid Test or Quick Ratio.
(Cash + Net Receivables + Marketable Securities) / Current Liabilities.
List the working capital ratio formula.
Current Assets / Current Liabilities.
What is financial statement ratio analysis?
The development of quantitative relationships between various elements of a firm’s financial statements.
List the formula for determining Operating Cycle Length.
Days’ Sales in Accounts Receivable + Days’ Supply in Inventory.
List the formula for Number of Days’ Sales in Accounts Receivable (AR).
365/ AR Turnover.
What do operational activity ratios measure?
They measure the efficiency with which a firm carries out its operating activities.
List the Accounts Receivable Turnover ratio formula.
Net Credit Sales / Average Net Accounts Receivable.
What do liquidity (or solvency) ratios measure?
Measure the ability of the firm to pay its debts as they come due.
