3414015
Description
Flashcards by joemiyashiro, updated more than 1 year ago
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Created by joemiyashiro
about 9 years ago
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| Question | Answer |
| Current ratio: measure of the ability of a firm to meet its short-term obligations. 2<x<3 optimal | current assets/ current liabilities |
| Quick ratio (acid-test) measure of liquidity where only liquid assets are taken into account | Cash+marketable securities+accounts receivables/ Current liabilities |
| Cash ratio = reveals how much the cash and marketable securities the company has on hand to pay off its current obligations | cash+marketable securities/ Current liabilities |
| Cash flow from operations ratio: indication of a company's ability to pay its ST liabilities with the cash it produces from current operations | cash flow from operations/ Current liabilities |
| Receivables turnover: indicator of the effectiveness of a company's credit policy. Too high = does not offer long enough creidt, too low = difficulties collecting cash | Net annual sales/ Average receivables |
| Average receivables | previously reported accounts receivable+current account receivables/ 2 |
| Average number of days receivables outstanding: same as receivable turnover except indicates as a number of days | 365 days/ receivables turnover |
| Average inventory | Previously reported inventory+current inventory/2 |
| Inventory turnover: efficiency of inventory utilisation. High = rapid sales, less risk of value decrease. | COGS/ Average inventory |
| Average number of days in stock | 365/ inventory turnover |
| Annual purchases= + - | COGS + ending inventory - beginning inventory |
| Payable turnover | Annual purchases/ Average payables |
| Average number of days payables outstanding | 365/ payable turnover |
| Cash conversion cycle: how many times it takes for the company to convert collection or investment into cash. High = large amount of money invested in sales in process | average collection period + average number of days in stock - average age of payables |
| Defensive interval: worst-case scenario that estimates how many days the company has to maintain its current operations without any additional days | 365*(cash+marketable securities+accounts receivable)/ projected expenditures |
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