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accounting ratios bc life stinks and i have to take an accounting final
Terms in this set (20)
current assets - current liabilities; a business's ability to meet its short term obligations with its current assets.
total current assets / total current liabilities; the company's ability to pay current liabilities from current assets.
(cash + cash equivalents) / total current liabilities; the company's ability to pay current liabilities from cash and cash equivalents.
Acid Test Ratio
(cash including cash equivalents + short-term investments + net current receivables) / Total current liabilities; the company's ability to pay all its current liabilities if they came due immediately.
cost of goods sold / average merchandise inventory; the number of times a company sells its average level of merchandise during a period.
Days' Sales in Inventory
365 days / inventory turnover; the average number of days that inventory is held by a company.
Gross Profit Percentage
gross profit / net sales revenue; the profitability of each sales dollar above the cost of goods sold.
Accounts Receivable Turnover
net credit sales / average net accounts receivable; the number of times the company collects the average receivables balance in a year.
Days' Sales in Receivables
365 days / receivables turnover; the number of days' sales it takes to collect the average level of receivables.
total liabilities / total assets; the proportion of assets financed with debt.
Debt to Equity Ratio
total liabilities / total equity; the proportion of total liabilities relative to total equity
Times Interest Earned Ratio
net income + interest expense + tax expense / interest expense; a business's ability to pay interest expense.
Profit Margin Ratio
net income / net sales; how much net income is earned on every dollar of net sales
Rate of Return on Total Assets
(net income + interest expense) / average total assets; A ratio that measures the success a company has in using its assets to earn income.
Asset Turnover Ratio
net sales / average total assets; how efficiently a business uses its average total assets to generate sales.
Rate of Return on Common Stockholders' Equity
(net income - preferred dividends) / average common stockholders' equity; the relationship between net income available to common stockholders and their average common equity invested in the company.
Earnings Per Share
net income - preferred dividends / weighted average common shares outstanding; amount of a company's net income (loss) for each share of its outstanding common stock.
Price Earnings Ratio
market price per share / earnings per share; the value the stock market places on $1 of a company's earnings.
annual cash dividends per share / market price per share; the percentage of a stock's market value that is returned annually as dividends to stockholders.
annual dividend per share / earnings per share; ratio of dividends declared per common share relative to the earnings per share of the company.
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