Finance Exam One
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Created by:
JoshReich22 on February 13, 2011
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32 terms
Terms | Definitions |
|---|---|
 Current Ratio | measures the company's ability to meet short-term obligations with current assets |
| Higher | the ------ the current ratio, the more capable a company is of paying off short term obligations |
| Quick Ratio | measures the company's ability to meet short-term obligations with the most liquid assets |
| Higher | the ------ the quick ratio, the more capable a company is of meeting short term obligations |
| Inventory Turnover | measures how many times inventory is sold and replaced over a period |
| Higher | the ------ inventory turnover, the more efficient the company is |
| Days Sales In Inventory | number of days it takes to sell the inventory |
| Lower | the lower the days sales in inventory, the more efficient |
| Accounts Receivable Turnover | measures the speed at which a firm converts its receivables into cash |
| Higher | the ------ the accounts receivable turnover, the more efficient |
| Days Sales Outstanding | number of days it takes to receive cash from the customer |
| Lower | the ------- the number of days sales outstanding, the more efficient |
| Fixed Assets Turnover | measures the utilization of the company's fixed assets |
| Higher | the ----- the fixed asset turnover, the more utilization |
| Total Asset Turnover | measures the utilization of the company's total assets |
| Higher | the ------- total asset turnover, the more efficient |
| Current Ratio, Quick Ratio | to assess liquidity risk, use the ----------- when the inventory turnover is high, and use the ------------ when the inventory turnover is low |
| Debt Ratio | portion of debt relative to assets, greater than one, a company has more debt relative to assets |
| Leverage | the amount of debt used to finance its assets, this is high when more debt is used to cover than equity because they can invest in business operations without using equity |
| Times Interest Earned | measures ability to cover interest charges using operating profit |
| EBIT | earnings before interest and tax |
| EBITDA | earnings before interst, tax, depreciation, amortization |
| Cash Coverage | measures ability to cover interest charges using cash operating profit |
| Gross Profit Margin | margin available to cover expenses other than cost of goods sold |
| Operating Profit Margin | margin available to cover interest charges |
| Net Profit Margin | margin available to cover dividends |
| Return on Assets | measures how efficiently assets are used to generate earnings |
| Return on Equity | measures how much profit company generates with shareholder's money |
| Price/Earnings | indication of future growth in earnings compared to current EPS |
| Price/Book | measures value added since the inception of the company |
| Volatility | the higher, the riskier |
| Weighted Average Cost of Capital | weights the different cost of capital components based on a company's optimal capital structure, used for management purposes. |
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