32 terms

Finance Exam One

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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.