Business Finance

43問 • 2年前

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are created with the use of numerical values taken from financial statements to gain meaningful information about a company.

Financial ratios

The numbers found on a company’s financial statements – _____ are used to perform quantitative analysis and assess a company’s liquidity, leverage, growth, margins, profitability, rates of return, valuation, and more.

balance sheet, income statement, and cash flow statement

FINANCIAL RATIOS are grouped into the following categories:

Liquidity ratios Leverage ratios Efficiency ratios Profitability ratios Market value ratios

are financial ratios that measure a company’s ability to repay both short-term and long term obligations.

LIQUIDITY RATIOS

Types of LIQUIDITY RATIOS

- Current Ratio - Acid-test/Quick Ratio

measures a company’s ability to pay off short-term liabilities with CURRENT ASSETS

Current Ratio

measures a company’s ability to pay off short term liabilities with QUICK ASSETS.

Quick Ratio

Current Ratio formula

Current ratio = Current assets / Current liabilities

not Quick Assets examples

prepaid expenses, inventory

Quick Ratio formula

Quick Ratio = Quick Assets/ Current Liabilities

is any one of several financial measurements that look at HOW MUCH CAPITAL COMES IN THE FORM OF DEBT (loans) or assesses the ability of a company to meet its financial obligations.

LEVERAGE RATIO

It is a measure of the degree to which a company is financing its operations through DEBT VERSUS WHOLLY-OWNED FUNDS.

Debt to equity ratio

Debt to equity ratio formula

Debt to equity ratio = Total liabilities / Shareholder’s equity

Types of Leverage Ratio

Debt to equity ratio Equity ratio

indicates how much of a company's assets have been generated by ISSUING EQUITY SHARES rather than by TAKING ON DEBT.

Equity ratio

Equity ratio formula

Equity ratio = Shareholder’s equity/Total assets

EFFICIENCY RATIO also known as ______, are used to measure how well a company is utilizing its assets and resources.

activity financial ratios

also known as activity financial ratios, are used to measure how well a company is utilizing its assets and resources.

EFFICIENCY RATIO

measures a company’s ability to GENERATE SALES FROM ASSETS

Asset turnover ratio

Asset turnover ratio formula

Asset turnover ratio = Net sales / Average Total assets

measures how many times a company can turn RECEIVABLES INTO CASH over a GIVEN PERIOD.

Account receivable turnover

Account receivable turnover formula

Accounts Receivables turnover = Credit sales/Average accounts receivable

indicates the NUMBER OF DAYS it takes to COLLECT THE CUSTOMER’S ACCOUNTS.

Average collection period

Average collection period formula

Average collection period = number of days in a year/account’s receivable turnover

measures HOW MANY TIMES a company’s INVENTORY IS SOLD and REPLACED over a given period.

Inventory turnover ratio

Inventory turnover ratio formula

Inventory turnover ratio = Cost of goods sold/Average inventory.

Also called RATE OF INVENTORY TURNOVER.

Inventory turnover ratio

measures the AVERAGE NUMBER OF DAYS that a COMPANY HOLDS ONTO its INVENTORY BEFORE SELLING IT to customers

Days sales inventory ratio

Days sales in inventory ratio = 365 days / Inventory turnover ratio

measure a company’s ability to GENERATE INCOME relative to revenue, balance sheet assets, operating costs, and equity

PROFITABILITY RATIO

Types of PROFITABILITY RATIO

1. Rate of Return on Total Assets 2. Rate of Return on Sales 3. Gross Profit Ratio 4. Net Profit Ratio 5. Return on Investment

measures how efficiently a company is USING ITS ASSETS TO GENERATE PROFIT

Rate of Return on Total Assets

Rate of Return on Total Assets formula

Rate of Return on Total Assets = Profit/Average Total Assets

calculates how efficiently a company is at generating profits from its revenue/sales. It measures a company’s performance by analyzing what percentage of total company revenues are actually converted into company profits.

Rate of Return on Sales

Rate of Return on Sales formula

Rate of return on sales = Net Profit / Net sales

compares the gross profit of a company to its net sales to SHOW HOW MUCH GROSS PROFIT a company makes AFTER PAYING OFF ITS COST OF GOODS SOLD

Gross Profit Ratio

Gross Profit Ratio formula

Gross Profit Ratio = Gross Profit/ Net Sales

Net Profit Ratio - also called ____ or ____

Net Profit Margin or Net Profitability Ratio

is one of the most important metrics to measure a business's profitability and financial success.

Net Profit Ratio

It is the ratio of net profits to the total sales (or revenue) of the company for a given period

Net Profit Ratio

Net Profit Ratio formula

Net Profit Ratio = Net Profit/ Net Sales

measures the percentage of PROFIT GENERATED BY INVESTMENT

Return on Investment

Return on Investment formula

ROI = Profit/Average Investment (Owner’s equity)

Business Finance

Sab Sescon · 46問 · 2年前

Business Finance