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19 Cards in this Set
- Front
- Back
Inventory Turnover
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=cost of goods sold / Average Inventory
-measures the number of times during the year inventory is replaced -higher number indicates greater efficiency |
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Days' sales outstanding
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=accounts receivable/ (sales / 360 days)
-measure of a company's effectiveness in collecting accounts receivable -smaller number for the ratio indicates greater effectiveness in managing and collecting money from customers |
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Accounts payable turnover
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=accounts payable/ (purchases/360 days)
-includes all outstanding obligations that a company owes its creditors |
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Fixed assets turnover
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=sales / average net fixed assets
-measure of how efficiently a company uses its fixed assets to generate sales -higher the fixed assets ratio, the better |
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Total assets turnover
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=sales/ average total assets
-measure of how well assets are being used to produce revenues |
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Current ratio
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=current assets/ current liabilities
-measures an organization's potential for paying down current liabilities -larger number for the ratio indicates more assets in relation to debt and therefore signals greater ability to pay holders of short-term debt |
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Quick ratio
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=current assets-inventory / current liabilities
-eliminates inventory, which is considered the least liquid portion of current assets and therefore the least available for reducing current debts |
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Net working capital
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=current assets - current liabilities
-measures the relationship of short-term debt to short-term assets by simply subtracting liabilities from assets |
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Debt ratio
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=total liabilities/ total assets
-all organization's debt to all its assets provides a general measure to its ability to repay creditors -the higher the number, the greater the firm's leverage |
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Debt-to-equity ratio
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=long-term debt/ total equity
-measures the organization's ability to cover long-term liabilities from owners' equity |
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Times interest earned ratio
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=earnings before interest and taxes (EBIT) / interest
-measures organization's ability to service all of its liabilities -indicates number of times a company can cover fixed obligations with earnings before interst and taxes (EBIT) |
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Fixed payment coverage ratio
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=earnings before interest and taxes (EBIT) / interest + (principle + preferred dividends) x [1/ (1-taxes)]
-organization's ability to pay fixed obligations within a set period of time |
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Gross profit margin
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=sales-cost of goods sold/ sales
-money remaining from sales revenues after deduction for the cost of goods sold -measure of probability |
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Operating profit margin
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=operating profits/ sales
-measures operational efficiency as well as effective pricing and cost controls |
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Net profit margin
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=net profit/sales
-measure of effectiveness of debt and tax management as well as effective management of operations, pricing, and cost controls |
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Return on Investment (ROI)
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=total asset turnover x net profit margin
-known as dupont formula -measuresan operation's effectiveness in using assets to generate profits |
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Return on Equity (ROE)
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=net profits/ shareholders' equity
-measures the operation's relative success in generating net profits |
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Return on capital
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=return on equity (RoE/ (1 + debt to equity ratio) or
=ROE x (1 - debt to capital) -measures an operation's effectiveness in using debt and equity to generate earnings |
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Earnings per share
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=total earnings/ no. of shares outstanding
-measure of company's value to investors |