Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CMA > Unit 2 > Flashcards

Unit 2 Flashcards

0
Q

They are expected to be converted to cash sold or consumed within one year or the operating cycle which ever is longer. Are the most liquid

A 
Current assets
Cash and equivalents
marketable securities 
receivables 
inventories and prepaid items
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

A firm’s ability to pay its current obligations as they come due and thus remain in business in the short run

A

Liquidity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

They are expected to be settled or converted to other liabilities within one year or the operating cycle which ever is longer.

A

Current liabilities
Accounts payable notes payable current maturities of long-term debt unearned revenues taxes payable wages payable and other accruals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Reports the resources the company would have to continue operating in the short run if it had to liquidate all of its current liabilities at once

A

Net working capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Most common measure of liquidity. Current assets divided by current liabilities

A

Current ratio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Excludes inventories and prepaid from the numerator recognizing that those assets are difficult to liquidate at their stated values. A more conservative measure then the basic current ratio

A

Quick ratio or acid test

Cash plus marketable securities plus net receivables divided by current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

This ratio measures the firm’s ability to easily pay it short-term debts and avoid the problem of inventory valuation

A

Quick ratio or acid test

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Cash plus marketable securities divided by current liabilities. Even more conservative variation

A

Cash ratio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Reflects the significance of cash flow for settling obligations as they become due

A

Cash flow ratio

Cash flow from operations divided by current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The most conservative of the working capital ratios

A

Net working capital ratio

Current assets minus current liabilities divided by total assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

The ease with which a firm can issue new debt or raise new structured (convertible puttable callable) funds

A

Liquidity of current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Indicates the ease of funding or availability of sources of funding. A firm’s ability to borrow in the financial markets is generally a function of its size reputation creditworthiness and capital levels.

A

Liquidity of current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Measures how quickly the two major non-cash assets are converted to cash

A

Activity ratios

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Measures the efficiency of accounts receivable collection

A

Accounts receivable turnover

Net credit sales divided by average accounts receivable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Measures the average number of days it takes to collect a receivable

A

Days sales outstanding in receivable also called the average collection period
Days in year divided by accounts receivable turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Measures the efficiency of inventory management

A

Inventory turnover

Cost of goods sold divided by average inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Measure the efficiency of the company’s inventory management practices

A

Days sales in inventory

Days in year divided by inventory turnover

17
Q

Measures the efficiency with which a firm manages the payment of vendors’ invoices

A

Accounts payable turnover

Purchases divided by average accounts payable

18
Q

Measures the average number of days it takes to settle a payable

A

Days purchases and accounts payable

Days in year divided by accounts payable turnover

19
Q

The amount of time that passes between the acquisition of inventory and the collection of cash on the sale of that inventory

A

Operating cycle

Days sales in receivables plus days sales in inventory

20
Q

Portion of the operating cycle that is not accounted for by days purchases in accounts payable

A

Cash cycle

Operating cycle minus days purchases in payables

21
Q

Measures how efficiently the company is deploying its investment in plant to generate revenues

A

Fixed assets turnover ratio

Net sales divided by average net property plant and equipment

22
Q

Firm’s ability to pay it’s noncurrent obligations as they come due and does remain in the long run

A

Solvency

23
Q

Is the creditor interest in the firm

A

Debt

24
Q

The ownership interest in the firm

A

Equity

25
Q

Measures the percentage of the firms capital structure provided by creditors

A

Total debt to total capital ratio

Total debt divided by total capital

26
Q

Is a direct comparison of the firms debt load versus it’s equity stake

A

Debt to equity ratio

Total debt divided by stockholders equity

27
Q

Reports the long-term debt burden carried by a company per dollar of equity

A

Long-term debt to equity ratio

Long-term debt divided by stockholders equity

28
Q

Reports that total debt burden carried by a company’s per dollar of assets

A

Debt to total assets ratio also called the debt ratio
Total liabilities divided by total assets
Numerically this ratio is identical to the debt to total capital ratio

29
Q

Is an income statement approach to evaluating a firm’s ongoing ability to meet the interest paymenst on its debt obligations

A

Times interest earned ratio

EBIT divided by interest expense

30
Q

Extends the times interest earned ratio to include the interest portion associated with long-term lease obligations

A

Earnings to fixed charges ratio
EBIT plus interest portion of operating leases divided by interest expense plus interest portion of operating leases plus dividends on preferred stocks

31
Q

Removes the difficulties of comparing amounts prepared on an accrual basis

A

Cash flow to fix charges ratio
Pretax operating cash flow divided by interest expense plus interest portion of operating leases plus dividends on preferred stock

32
Q

The relative amount of fixed costs in a firms overall cost structure

A

Leverage

33
Q

Arises from the use of high level of plant and machinery in the production process revealed through charges for depreciation property taxes etc.

A

Operating leverage

34
Q

Arises from the use of high level of debt in the firms financing structure revealed through amounts paid out for interest

A

Financial leverage

35
Q

Although leverage arises from Adams on the balance sheet. It is measured by examining its effects on the income statement. A general statement of leverage is

A

Degree of leverage equals prefix cost income amount divided by post fixed cost income amount

36
Q

Contribution margin divided by operating income or EBIT

A

Degree of operating leverage single-peroid Version

37
Q

Percentage change in operating income or EBIT divided by percentage change in sale

A

Degree of operating leverage percentage change version

38
Q

EBIT divided by earnings before taxes

A

Degree of financial leverage single period Version

39
Q

Percentage change in net income divided by percentage change in EBIT

A

Degree of financial leverage percentage change version

CMA (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions