10501404
| Question | Answer |
| Current Ratio | Current Assets / Current Liabilities Measures ST solvency. "For each $ of CL, they # CA." |
| Quick Ratio "Liquidick Ratio" | Current Assets - Investments / Current Liabilities Measures liquidity to repay debts. LIQUIDICK RATIO "For each $ of CL, they have # assets." |
| Total Assets Turnover Ratio | Sales / Total Assets Measures how each dollar of sales is tied in assets. |
| Fixed Assets Turnover Ratio | Sales / Net Fixed Assets Measures how effectively fixed assets are used to generate sales. |
| Days Sales Outstanding (DSO) Ratio | Receivables / Annual Sales / 365 Measures time waiting to receive cash after a sale has been made in days in a year. |
| Inventory Turnover Ratio | COGS + Depreciation / Inventories / 365 Measures how many times inventory turns over in days in a year. |
| Debt to Assets Ratio | Total Debt / Total Assets Measures how much of a firm's total assets are financed by debt. |
| Times-Interest-Earned (TIE) Ratio | EBIT / Interest Ability to Pay Interest Measures how much a firm can decline before it can't meet annual interest costs. |
| Profit Margin on Sales (Net Profit Margin) | NI available to common stockholders / Sales Measures profit to stockholders per dollar of sales. |
| Basic Earnings Power (BEP) | EBIT / Total Assets Measures the earning power of a firm's assets before interest and taxes. |
| Return on Total Assets (ROA) | NI available to common stockholders / Total Assets Measures return on total assets after interest and taxes. |
| Return on Common Equity (ROE) | NI available to common stockholders / Common Equity Measures the firm's ability to generate profits from its shareholders investments. |
| Price/Earnings (P/E) | Price per share / Earnings per share Measure how much investors are willing to pay per dollar of REPORTED PROFITS. SHARE VALUATION |
| Market/Book (M/B) | Market price per share / Book value per share Measure how much investors are willing to pay per dollar of the FIRM'S BOOK VALUE. FIRM VALUATION |
| Liquidity Ratios show... | the relationship of a firm's current assets to its current liabilities and thus its abilities to meet maturing debts. |
| Asset Management Ratios measure... | how effectively a firm is managing its assets. |
| Debt Management Ratios reveal... | 1. a firm's financed debt 2. the chance of firm defaulting on debt |
| Profitability Ratios show... | the combined effects of liquidity, asset management, and debt management policies on operating results. |
| Market Value Ratios show... | what investors think of company's performance by the value of its current share price. |
| Trend Analysis is important because... | it reveals whether the firm's has been improving or deteriorating over time. |
| The DuPont Equation shows how... | the profit margin on sales, the assets turnover and the use of debt interact to determine the rate of return on equity. |
| Benchmarking is the process of... | comparing a particular company with a group of similar successful companies. |
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