SIE 367
Card Set Information
Author:
driven360
ID:
217878
Filename:
SIE 367
Updated:
2013-05-05 16:31:08
Tags:
Financial measurements
Folders:
Description:
SIE 367 U OF A
Show Answers:
§Debt Ratio- This is a measure of
the amount of debt used to finance assets.
= AVG Debt / AVG Assets
Debt excludes Payables
§Interest Coverage Ratio- Used by
lending institutions to determine ability to meet loan expenses.
= EBIT (Earnings Before Interest & Taxes) / Interest
Expense
§Working Capital- Measures a
company’s ability to pay current liabilities.
= AVG Current Assets – AVG Current
Liabilities
Current Ratio- Illustrates excess
coverage of current assets to pay current debts
= AVG Current Assets / AVG Current
Liabilities
§Quick Ratio (Acid Test)- Harsh test
to determine ability to pay current obligations
= (AVG Current Assets – AVG
Inventory) / AVG Current Liabilities
Inventory Turnover- Measures how
frequently inventory is replenished
= Sales per unit Time / AVG
Inventory
Note
: Reciprocal is shelf life of
inventory
Accounts Receivable Turnover-
Measures frequency of A/R collection per unit time
= Sales per unit Time / AVG
Receivables
Note
: Reciprocal is Receivables
collection time
§Total Assets Turnover- Measures how
well a firm uses it’s assets to produce revenue.
= Sales per unit Time / AVG Total
Assets
Note
: Reciprocal is Asset
Utilization, the time assets are used to produce revenue
§Gross Margin- Ratio of Gross Profit
to Sales (%).
= Gross Profit / Sales
§Net Margin- Ratio of Net Income to
Sales (%).
= Net Income / Sales
§Return on Total Assets- Measures a
company’s utilization of assets to earn a profit.
={ (Net Income + (Interest Expense) * (1 –
Tax rate))} / AVG Total Assets
§Return on Equity- Measures the return of
a company per dollar of shareholder equity.
= Net Income / AVG Shareholder Equity
Annual Averages of Balance Sheet
values are computed as follows from Monthly Balance Sheets:
summation of 12 month balance sheet value/ 12