Financing Ratios

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Author:
Lamies10
ID:
116064
Filename:
Financing Ratios
Updated:
2011-11-11 08:47:13
Tags:
Financing
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Description:
chp.18
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  1. Debt to Equity
    How much debt financing do we have compared to equity?

    LOWER is better
  2. Debt Ratio
    How much of the company is financed through debt?

    LOWER is better.
  3. Cash to Long-term Debt
    How easily can we repay long-term debt with available cash? What percentage of debt can we pay back with our cash reserves?

    HIGHER is better
  4. Recievables to Long-term Debt
    How easily can we repay long-term debt with receivables coming in? What percentage of debt can we pay back as our customers pay us?

    HIGHER is better
  5. Dividend Payout Ratio
    How much of earnings is being paid out in dividends?

    • Depends: We want LOWER, unless the company is a
    • maturing firm and the investors primarily buy the stock for the dividends
  6. Percentages of Earnings Retained
    How much of our profits are we retaining in the company?

    • Depends: We want HIGHER, unless
    • the company is a maturing firm and the investors primarily buy the stock for
    • the dividends.
  7. External Financing Index
    Compares cash generated from operations (internal sources of financing) with cash generated from external sources of financing (debt and equity).

    HIGHER is better
  8. Reinvestment Ratio
    Is the company keeping up with replacing its assets as they wear out or are sold off?

    HIGHER is better

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