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16 Cards in this Set
- Front
- Back
Time Series Analysis
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Analyizes chainges in profitability ratios over time
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Cross-section analysis
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Compare companies in the same industry
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Rate of Return on Assets
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See sheet for formula-and explanation
Not good for companies whoese assets are people-Minority interest-Happens when the company buys a piece of a company but not the entire company |
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Profit Margin
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Measure the companys ability to generate income from operations at a level of sales
Income/Sales |
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Asset Turnover
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Asset Turnover measures ability to generate sales revenue from a level of assets
Sales/Assets |
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Sales to Receivables
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Reflects trade-off between increases sales and accumulation of funds in receivables
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Sales to inventories
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reflects trades-off between funds accumulated in inventory and the potential loss of current and future sales
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Sales to fixed assets
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reflects trade-off between fixed asset investments having high break even points and investments in more efficient productive assets with high sales potential
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Operating Leverage
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Is the process of operating with a higher proportion of fixed costs
-Will have higher variability in their ROA -Committed fixed costs are incurred regardless of the actual level of activity |
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Cyclicality of sales
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Companies strive for variable cost structure when sales are cyclical to reduce inherent risk
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Product Life Cycle
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1-Introduction-Negative or low ROA
2-Growth-Increasing ROA 3-Maturity-Highest ROA 4-Decline-Return to low ROA |
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AR Turnover
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Net Sales on account/average AR Balance
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Inventory Turnover
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=Cost of Goods Sold/Average Inventories
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Fixed Asset Turnover
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Sales/Average Fixed Assets
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Rate of Return on Common Shareholders Equity-ROCE
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=(Net Income-Preferred stock dividend)/(Average Common Shareholders Equity)
Measure the Return to common shareholders including the results of a company's operating, investing, and financing decision |
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Earning Per Common Share
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Basic EPS= Net Income-Preferred Stock Dividends/Weighted Average # of common shares outstanding
-Can raise or lower depending on the # of shares outstanding -A company can buy more shares back to raise EPS -Neg-Doesnt take into account # of assets, etc. |