SU 2: Ratio Analysis Flashcards
Current Ratio
Current Assets/Current Liabilities
Net Working Capital
Current assets - Current liabilities
Quick (Acid Test) Ratio
Cash + Marketable Securities + Net receivables/Current Liabilities
Cash Flow Ratio
Cash flow from operations/Current liabilities
Cash Ratio
Cash + Marketable Securities/Current Liabilities
Debt Ratio
Total Debt (Liab)/Total Assets
Net Working Capital Ratio
Current assets - Current liabilities/Total assets
Accounts Receivable Turnover
Net credit sales/Average accounts receivable
Days’ Sales Outstanding in Receivables
Days in year/Accounts receivable turnover
Inventory Turnover
Cost of goods sold/Average inventory
Days’ Sales in Inventory
Days in year/Inventory Turnover
Accounts Payable Turnover
Purchases/Average accounts payable
Operating Cycle
Days’ sales in receivables + Days’ sales in inventory
Cash Cycle
Operating cycle - Days’ purchases in payables
Fixed Assets Turnover Ratio
Net Sales/Average net property, plant, and equipment
Total Assets Turnover Ratio
Net Sales/Average total assets
Total Debt to Total Capital Ratio
Total Debt/Total Capital
Debt to Equity Ratio
Total Debt/Stockholders’ equity
Long-Term Debt to Equity Ratio
Long-term debt/Stockholders’ equity
Debt to Total Assets Ratio (Debt Ratio)
Total Liabilities/Total Assets
Times Interest Earned Ratio
EBIT/Interest Expense
Earnings to Fixed Charges Ratio
EBIT + Interest portion of operating lease/Interest expense + Interest portion of operating leases + Dividends on preferred stock
Cash Flow to Fixed Charges Ratio
Pre-tax operating cash flow/Interest expense + Interest portion of operating leases + Dividends on preferred stock
Operating Leverage
Arises from the use of a high level of plant and machinery in the production process, revealed through charges for depreciation, property taxes, etc.
Financial Leverage
Arises from the use of a high level of debt in the firm’s financing structure, revealed through amounts paid out for interest
Degree of Leverage
Pre-fixed-cost income amount/Post-fixed-cost income amount
Degree of Operating Leverage (DOL)- Single-Period Version
Contribution Margin/Operating Income or EBIT
Degree of Operating Leverage (DOL)- Percentage-Change Version
% change in operating income or EBIT/% change in sales
Degree of Financial Leverage (DFL)- Single-Period Version
Earnings before interest and taxes (EBIT)/Earnings before taxes (EBT)
Degree of Financial Leverage (DFL)- Percentage-Change Version
% change in net income/% change in EBIT
Return on Assets
Net Income/Total Assets
Net Profit Margin
Net Income/Net Sales
