Ch 3 Key Terms Stice

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Asset Turnover
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Terms in this set (24)
Asset Turnover
overall measure of a company's efficiency
Assets-to-Equity Ratio
ASSETS / EQUITY
the number of dollars of assets acquired for each dollar invested by stockholders
Average Collection Period
avg. # of days that lapse between sale and cash collection
Cash Flow to Net Income Ratio
reflects the extent to which accrual accounting assumptions and adjustments have been included in computing net income
Cash Flow Adequacy Ratio
Cash from Operating Activities/Cash used to purchase: Buildings+Equipment+Land+Other Fixed Assets+Acquisitions of New Businesses
Cash times Interest Earned Ratio
an informative indicator of a companies interest paying ability compares cash generated by operations to cash paid for interest
Common Size Financial Statement
Statement that expresses each amount as a percent of a base amount.
In the balance sheet, total assets is usually the base and is expressed as 100%. In the income statement, net sales is usually the base.
Current Ratio
Current Assets/Current Liabilities
Debt Ratio
Total Liabilities/Total Assets
Debt to Equity Ratio
Total Debt/Total Equity
# of dollars of borrowing for each dollar of equity investment
DuPont Frameworka systematic approach for breaking down return on equity into three ratios: return on sales, asset turnover, and assets to equity ratio.Financial Ratioscomparisons of a company's financial elements that indicate how well the business is performing Relationships btwn financial statement amountsFinancial Statement Analysisinvolves the examination of both the relationships among financial statement numbers and the trends in those numbers over timeFixed Asset TurnoverSALES / AVG FIXED ASSETS # of dollars in sales generated by ea. dollar of fixed assetsLeverageinvesting with borrowed money as a way to amplify potential gains (at the risk of greater losses)Liquiditybeing in cash or easily convertible to cashMarginprofitability of ea. dollar in salesNumber of Days Sales in Inventorymeasures the number of days on average between buying the inventory from suppliers and selling it to customersPrice-Earnings RatioMARKET VALUE OF SHARES / NET INCOME relationship between market value of a C. and the company's current earningsReturn on AssetsNet Income / Total assets the number of pennies of net income generated by each dollar of assetsReturn on EquityNET INCOME / STOCKHOLDERS' EQUITY overall measure of the performance of a companyReturn on SalesNET INCOME / SALES number of pennies of profit generated by each dollar in salesTimes Interest EarnedINCOME / INTEREST EXPENSE number of times a company can make current interest paymentsTurnoverdegree to which assets are used to generate sales