442300
Description
Flashcards by holden_cowfield, updated more than 1 year ago
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Created by holden_cowfield
about 11 years ago
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| Question | Answer |
| Net profit margin | Net income / Revenue |
| Return on Assets (ROA) | Operating income / Average total assets (a higher result is better) |
| Return on Equity (ROE) | Net income / Average shareholders' equity |
| Vertical Analysis | Common-size analysis using only one reporting period |
| Horizontal Analysis | Common-size analysis comparing multiple time periods or multiple companies |
| Activity Ratios | Measures how efficiently a company performs day-to-day tasks (collect a/r, manage inv) |
| Liquidity Ratios | Measures a company's ability to meet its short-term obligations |
| Solvency Ratios | Measures a company's ability to meet long-term obligations. Subsets aka "leverage" & "L-T debt" ratios. |
| Profitability Ratios | Measures a company's ability to generate profits from its resources (assets) |
| Valuation Ratios | Measures the quality of an asset or flow associated with ownership of a specified claim |
| Inventory Turnover (Activity Ratio) | Cost of sales or cost of goods sold / Average inventory |
| Days of Inventory on Hand (DOH) (Activity Ratio) | Number of days in period / Inventory turnover |
| Receivables Turnover (Activity Ratio) | Revenue / Average receivables |
| Days of sales outstanding (DSO) (Activity Ratios) | Number of days in period / Receivables turnover |
| Payables Turnover (Activity Ratios) | Purchases / Average trade payables |
| Number of days of payables (Activity Ratios) | Number of days in period / Payables turnover |
| Working capital turnover (Activity Ratios) | Revenue / Average working capital |
| Fixed asset turnover (Activity Ratios) | Revenue / Average net fixed assets |
| Total asset turnover (Activity Ratios) | Revenue / Average total assets |
| Defensive Interval Ratio | Measures how long a company can pay its daily cash expenditures using only existing liquid assets |
| Cash Conversion Cycle | A metric (not ratio) that measures the length of time required for a co to go from $ paid to $ received |
| Current Ratio | Current assets / Current liabilities (higher is better) |
| Quick Ratio | Cash + Short-term marketable investments + Receivables / Current liabilities (higher is better) |
| Cash Ratio | Cash + Short-term marketable investments / Current liabilities |
| Defensive interval ratio | Cash + Short-term marketable investments + Receivables / Daily cash expenditures (higher = greater liquidity) |
| Cash Conversion Cycle (net operating cycle) | DOH + DSO - # days of payables |
| Cash Conversion Cycle Steps | 1) Buy inv on credit, 2) Sell inv on credit, 3) Pay to settle AP, 4) Collect $ to settle AR |
| Cash Conversion Cycle | A shorter cycle = greater liquidity (neg # can be ok, but big neg # can mean trouble) |
| Operating Leverage | Results from the use of fixed costs in conducting the company's business |
| Financial Leverage | The use of debt to finance a company |
| Two types of solvency ratios | 1) Debt ratios, 2) Coverage ratios |
| Debt ratios (a solvency ratio) | Focus on the balance sheet and measure the amount of debt capital relative to equity capital |
| Coverage ratios (a solvency ratio) | Focus on the income statement and measure the ability of a co to cover its debt payments |
| Debt-to-assets Ratio | Total debt / Total assets (higher ratio = more risk) |
| Debt-to-capital Ratio | Total debt / total debt + total shareholders' equity (higher ratio = more risk) |
| Debt-to-equity Ratio | Total debt / Total shareholders' equity (higher ratio = less solvent) |
| Financial Leverage Ratio | Average total assets / Average total equity (higher = more levered) |
| Interest Coverage | EBIT / Interest payments (higher = more solvent) |
| Fixed charge coverage | EBIT + Lease payments / Interest payments + Lease (higher = more solvent) |
| Fixed Charge Coverage Use | Used as an indication of the quality of preferred dividend (higher = div more secure) |
| Gross profit margin | Gross profit / Revenue |
| Operating profit margin | Operating income / Revenue |
| Pretax margin | EBT / Revenue |
| Net profit margin | Net income / Revenue |
| Operating ROA | Operating income / Avg total assets |
| ROA | Net income / Average total assets |
| Return on total capital | EBIT / Short- and long-term debt and equity |
| ROE | Net income / Average total equity |
| Return on common equity | Net income - pref div / Average common equity |
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