Ratios

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Author:
eddieglines
ID:
233487
Filename:
Ratios
Updated:
2013-09-09 00:02:56
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Ratios
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Description:
Finance 505
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  1. Define Current Ratio
    Current Assets/Current Liabilities
  2. What does current ratio measure
    Short-term liquidity
  3. Current Ratio units
    time or money
  4. Define quick ratio or acid test ratio
    (Current assets - inventory)/current liabilities
  5. what does quick ratio measure
    subtracts inventory from current assets since less liquid and inventory could be damaged
  6. define cash ratio
    cash/current liabilities
  7. who interested in cash ratio
    very short term creditor
  8. what are the short term solvency ratios
    • 1. current ratio
    • 2. quick ratio
    • 3. cash ratio
  9. define total debt ratio
    (total assets - total equity)/total assets
  10. Groups of financial ratios
    • 1. Short-term solvency or liquidity ratios 
    • 2. Long-term solvency or financial leverage ratios
    • 3. Asset management or turnover ratios 
    • 4. Profitability ratios
    • 5. Market value ratios
  11. What total debt ration tells you
    $ of debt per $ of assets
  12. Define debt - equity ratio
    Total debt/total equity
  13. Define equity multiplier
    • Total assets/total equity
    • or 1 + Debt-equity ratio
  14. Define Times Interest Earned
    EBIT/Interest
  15. What does Times Interest Earned mean
    measures how well a company has its interest obligations covered, and it is often called the interest coverage ratio
  16. Define Cash coverage ratio
    EBITDA/Interest
  17. What does Cash coverage ratio mean
    It is a basic measure of the firm’s ability to generate cash from operations, and it is frequently used as a measure of cash flow available to meet financial obligations
  18. What are the Long-term solvency or financial leverage ratios
    • 1. Total debt ratio
    • 2. Debt-equity ratio
    • 3. Equity multiplier
    • 4. Times interest earned
    • 5. Cash coverage
    • 6. Unnamed ratio with EBITDA
  19. Unnamed long term solvency ratio
    Interest bearing debt/EBITDA
  20. Define inventory turnover
    COGS/inventory
  21. Days' sales in inventory
    365 days/inventory turnover ratio
  22. Total Asset Turnover
    Sales/Total Assets
  23. Define Return on Assets
    Net Income/Total Assets
  24. Define Return on Equity
    Net Income/Total Equity
  25. Asset Management or Turnover Measures
    • 1. Inventory Turnover
    • 2. Days’ Sales in Inventory
    • 3. Receivables Turnover
    • 4. Days’ Sales in Receivables
    • 5. Total Asset Turnover
  26. Define Profit Margin
    Net Income/Sales
  27. EBITDA Margin
    EBITDA/Sales
  28. Return on Assets
    Net Income/Total Assets
  29. Return on equity
    Net income/Total equity
  30. Profitability measures
    • 1. Profit Margin
    • 2. EBITDA Margin
    • 3. Return on Assets
    • 4. Return on Equity
  31. Earnings Per Share
    Net Income/Shares outstanding
  32. Price-Earnings Ratio
    Price per share/Earnings per share
  33. Market-to-Book ratio
    Market value per share/book value per share
  34. Market capitalization
    Price per share x shares outstanding
  35. Enterprise Value
    Market capitalization + market value of interest bearing debt - cash
  36. Enterprise value multiples
    EV/EBITDA
  37. Market Value Ratios
    • 1. Price-earnings ratio
    • 2. Market-to-book ratio
    • 3. Enterprise Value multiple
  38. Du Pont identity
    • ROE = PM x TATO x EM
    • ROE = NI/Sales x Sales/Total assets x Total assets/total equity
  39. The Du Pont identity tells us that ROE is affected by three things
    • 1. Operating efficiency (as measured by profit margin)
    • 2. Asset use efficiency (as measured by total asset turnover)
    • 3. Financial leverage (as measured by the equity multiplier)
  40. Dividend payout ratio
    Cash dividends/Net income
  41. retention ratio or plow back ratio
    • Addition to retained earnings/Net income
    • or 1 - dividend payout ratio
  42. capital intensity ratio
    total assets/sales for the year just ended
  43. External financing need
    (Assets/sales) x change in sales - (spontaneous liabilities/sales) x change in sales - PM

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