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17 terms

Current Ratio

Current Assets / Current Liabilities

Acid-Test (Quick) Ratio

Cash + Short Term Investments + Receivables (Net)/

Current Liabilities

Current Liabilities

Receivables Turnover

net credit sales/average Net. receivables; Used to determine how long it takes to collect on Receivables

Inventory Turnover

the number of times per year that a company sells or "turns over" its average inventory. Cost of Goods Sold/ Average Inventory

Profit Margin

Net income / Net sales

Asset Turnover

a measure of how efficiently an entity uses its assets to generate sales. Net Sales/ Average Assets.

Return on Assets

Indicates the amount of profit earned on each dollar the firm has invested in assets [net income/average total assets]

Equity

An owners portion of an item

Debt to Total Assets

total debt/ total assets

Return on Common Stockholders Equity

Net Income/ Average common stockholders equity

Earnings per share

A form of profitability ratio calculated as Net Income/ Weighted average of common shares outstanding.

Price Earnings Ratio

market price per share/earnings per share

Payout Ratio

Cash dividends declared on common stock / Net income

Times interest earned

(Net income + Interest Expense + Income Tax Expense)/Interest Expense

Vertical Analysis

Also known as common-size analysis). A method of analyzing comparative financial statements in which percentages are computed for each item within a statement to a total within the statement. On a Balance Sheet you divide by Total Assets. On an Income Statement you divide by Total Sales.

Horizontal Analysis

(Also known as Trend Analysis). Looks at the percentage change in a line item's value from one year to the next using the formula: [(subsequent year -base year)/base year)

Solvency Ratios

Measures of the ability of the company to survive over a long period of time