Week 3 Ratios

Question 1

Current Ratio

(Quick Ratio?)

Answer 1

Current Assets/Current Liabilities

(Cash+Marketable Securitys +A/R) / Current Liabilities

Question 2

Interest Coverage Ratio

Answer 2

EBIT( Earnings before Interest and Tax)/Interest Expense

Capital Adequacy (leverage)

Question 3

Return on Assets

Answer 3

Net Income/Average Total Assets

Question 4

Inventory Turnover

Answer 4

Cost of Goods Sold/Average Inventory

Number of times inventory was sold during the year (how quickly it is moving during the year)

Question 5

Bad Debt Expense

Answer 5

Ending Allowance of Bad Debt (new) - Existing Allowance of Bad Debt (old)

Question 6

Net A/R Accounts Receivable

Answer 6

AR- Allowance of Bad Debt (new)

Question 7

Stock Holders Equity

Answer 7

Paid-in-Capital + Retained Earnings

Question 8

Authorized stock equation

Answer 8

Authorized Stock = Issued (sold) and Unissued

Issued = Outstanding + Treasurary

Question 9

Gross Margin

Answer 9

Gross Margin Net sales - COGS