Flashcards
RSM219 Ratios
Cards in this deck (22)
- 1Cash Flows to Total LiabilitiesSOLVENCY- COVERAGE
(Cash Flows from Operating Activities) /
(Total Liabilities)
-measure of the % of company's total obligations which can be met with one year's operating cash flows.
-can safely be <1, since only CL due within year, and some liabilities not paid in cash - 2Net Free Cash FlowEQUITY ANALYSIS
=Cash flow from operating activities- net capital expenditures -dividends on preferred shares
Cash flow generated from operating activities available to common shareholders - 3Book Value-Total value of company shareholders would recieve if it were to be liquidated
-we compare with market value
Cost of Asset- accum depreciation
OR
Total Assets-intangible assets-liabilities - 4Current RatioLIQUIDITY
Current Assets/Current liabilities
Ability to meet the current obligations with current assets
-Too liquid, or not liquid enough - 5Quick RatioLIQUIDITY
(Current Assets -Prepaid Expenses -Inventory)/ (Current liabilities)
Ability to meet current obligations with most current assets (ie cash and A/R) - 6A/R Turnover & Ave Collection PeriodACTIVITY
A/R Turnover= Credit Sales/Ave A/R
Efficiency of A/R Collection
Ave Collection Period= 365/A/R Turnover
Average days to collect recievables - 7Inventory Turnover & Days to SellACTIVITY
Inventory Turnover= COGS/Ave Inventory
How frequently inventory is turned over during the period
Days to Sell= 365/Inventory Turnover
Number of days to sell - 8A/P Turnover & A/P Payment PeriodACTIVITY
A/P Turnover= Credit Purchases-Ave A/P
How frequently are creditors paid?
***Here, COGS can be used as approximation of Credit Purchases, OR
COGS-beg inv +end inv= Purchases
A/P Payment Period=365/A/P Turnover
Days to pay suppliers - 9Debt to EquitySOLVENCY- LEVERAGE (means using debt to finance some assets)
=Net Debt/Shareholder's Equity
Amount of debt relative to shareholder's equity, assesses risk
WHERE Net Debt= interest bearing debt OR total liabilities (bank loans+current portion of long terAm debt+long term debt)-cash&cash equivalents - 10Net Debt as a % of Total CapitalizationSOLVENCY- LEVERAGE (using debt to finance some assets)
=Net Debt /(Shareholder's Equity + Net Debt) as a percentage
Portion of total financing represented by debt
WHERE Net Debt=interest bearing debt (bank loans+current portion of long term debt+long term debt)-cash&cash equivalents - 11Interest CoverageSOLVENCY- COVERAGE
=EBITDA/Interest Expense
ability to cover interest expense from earnings- number of times company earnings could pay interest expense - 12Gross Profit MarginPROFITABILITY
=Gross Margin/Sales Revenue
Profit after product costs to cover other operating costs
For every dollar of Revenue, how much left after COGS to pay other op. exp.
WHERE gross margin=Sales Revenue-COGS - 13Net Profit MarginPROFITABILITY
=Net Income/ Sales Revenue
Net profit earned for every $1 in Sales Revenue - 14Return on EquityPROFITABILITY
=Net Income/Ave.Total Shareholder's Equity
(as a percent)
Rate of return on resources provided by investors as a percentage
Amount of net income for every $1 in investor equity - 15Return on AssetsPROFITABILITY
=Net Income/Ave total assets
Net income derived for every $1 in assets invested
Measures the overall profitability of funds invested in company assets - 16Basic Earnings per Share (EPS)EQUITY ANALYSIS
=(Net Income -Preferred dividends) /Weighted ave number of common shares outstanding
Profit earned on each common share
(portion of earnings attributable to individual shares, NOT the amount of dividend paid out to each shareholder) - 17Price Earnings Ratio, P/EEQUITY ANALYSIS
=Market price per share/Earnings per share
WHERE market price per share is the closing share price on last trading day closest to year end- info obtained on financial websites
-the amount investors are willing to pay for a dollar's worth of earnings - 18Dividend Payout RatioEQUITY ANALYSIS
=Dividends per share/Earnings per share
portion of company income paid out as dividends - 19Dividend Yield RatioEQUITY ANALYSIS
=Dividends per share/Price per share
Rate of return provided by dividends relative to current share price
Measures the dividend investor will receive relative to price of share - 20Average Age %Total Accumulated Depreciation/
Total PPE-land
Measuring the age of assets - 21Average AgeTotal Accumulated Depreciation/Depreciation Expense
Measuring age of assets - 22Fixed Asset TurnoverSales Revenue/Average Net PPE
Effective company use of long term assets
-how many sales for each $1 of longterm assets?
-low ratio: inefficient PPE/unused capacity
-high ratio: very efficient use/ old assets
Information
- Description
- Flashcards on RSM219 Ratios, created by A H on 09/12/2015.
- Created by
- A H · Dec 2015
- Updated
- Mar 14, 2018
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