How can we help?

You can also find more resources in our Help Center.

Current ratio

Acid-test ratio

Accounts receivables turnover

Inventory turnover

Current assets/ current liabilities

Cash+ Short-term investments+current receivables/ current lia…

Net sales/ Average accounts receivable, net

Costs of goods sold/ Average inventory

Current ratio

Current assets/ current liabilities

Acid-test ratio

Cash+ Short-term investments+current receivables/ current lia…

Current Ratio

Quick Ratio

Cash Flow Liquidity

Accounts Receivable Turnover

Current Assets/Current Liabilities

(Cash+Short-Term Investments + Accounts Receivable)/Current L…

(Cash+Short-Term Investments+Cash Flow from Operations)/Curre…

Net Sales/Average Accounts Receivable

Current Ratio

Current Assets/Current Liabilities

Quick Ratio

(Cash+Short-Term Investments + Accounts Receivable)/Current L…

Two phases of financial statement anal…

Computation phase

Vertical analysis on the balance sheet

Horizontal analysis

Computation and interpretation

Vertical analysis horizontal n ratio analysis

On the balance sheet everything is recorded as a percentage o…

Percentage change for individual items on the financial state…

Two phases of financial statement anal…

Computation and interpretation

Computation phase

Vertical analysis horizontal n ratio analysis

Profitablity Ratios

liquidity ratios

Total Asset Turnover Ratio (Efficiency…

Inventory Turnover Ratio (Efficiency R…

gross operating net profit

current quick

Sales (Revenues) / Total Assets... Efficiency with which a comp…

Costs of Goods sold/ inventory

Profitablity Ratios

gross operating net profit

liquidity ratios

current quick

Working Capital

Current Ratio

Inventory Turnover

Days Supply of Inventory

Current Assets - Current Liabilities

Current Assets/Current Liabilities

Cost of Goods Sold/Inventories

365/Inventory Turnover

Working Capital

Current Assets - Current Liabilities

Current Ratio

Current Assets/Current Liabilities

Current Ratio

Acid-test Ratio

quick assets

Accounts Receivable Turnover Ratio

current assets divided by current liabilities

quick assets divided by current liabilities

cash, short-term investments, accounts receivable

net sales divided by average accounts receivable

Current Ratio

current assets divided by current liabilities

Acid-test Ratio

quick assets divided by current liabilities

Current ratio

Acid-test (quick) ratio

Accounts receivable turnover

Inventory turnover

Current assets/ current liabilities, measures short term debt…

Investments+AR(net)/ Current Liabilities, measures immediate…

net credit sales/ average net AR, measures liquidity of AR

COGS/ avg inventory, measures liquidity of inventory

Current ratio

Current assets/ current liabilities, measures short term debt…

Acid-test (quick) ratio

Investments+AR(net)/ Current Liabilities, measures immediate…

Current Ratio

Quick Ratio

Cash Flow Liquidity

Accounts Receivable Turnover

Current Assets/Current Liabilities

(Cash+Short-Term Investments + Accounts Receivable)/Current L…

(Cash+Short-Term Investments+Cash Flow from Operations)/Curre…

Net Sales/Average Accounts Receivable

Current Ratio

Current Assets/Current Liabilities

Quick Ratio

(Cash+Short-Term Investments + Accounts Receivable)/Current L…

Current Ratio

Acid-Test Ratio

Accounts Receivable Turnover

Inventory Turnover

Current Assets / Current Liabilities

Cash + Short-term Investments + Current Receivables / Current…

Net Sales / Avg Accounts Receivable, net

Cost of Goods Sold / Avg Inventory

Current Ratio

Current Assets / Current Liabilities

Acid-Test Ratio

Cash + Short-term Investments + Current Receivables / Current…

Current Ratio

Acid-test Ratio

A/r turnover

Inventory Turnover

Current Assets/current Liabilities

(Cash+Short-term investments+Current Receivables)/Current Lia…

Net Sales/Avg A/R

COGS/Avg Inventory

Current Ratio

Current Assets/current Liabilities

Acid-test Ratio

(Cash+Short-term investments+Current Receivables)/Current Lia…

Measures of Liquidity (1)

Measures of Leverage (2)

Measures of Management (4)

Measures of Profitability (5)

Current Ratio

Debt Ratio, Debt to Equity Ratio

A/R Turnover, Days Sales in A/R, Inventory Turnover, Days Sal…

Earnings Per Share (EPS), Book Value per Share, Price-Earning…

Measures of Liquidity (1)

Current Ratio

Measures of Leverage (2)

Debt Ratio, Debt to Equity Ratio

Liquidity Ratios

Activity Ratios

Profitability Ratios

Coverage Ratios

current ratio, quick (acid test) ratio, current cash debt cov…

receivables, inventory, and asset turnover

profit margin on sales, rate of return on assets, rate of ret…

debt to total assets, times interest earned, cash debt covera…

Liquidity Ratios

current ratio, quick (acid test) ratio, current cash debt cov…

Activity Ratios

receivables, inventory, and asset turnover

Current Ratio

Acid-Test Ratio

Accounts Receivable Turnover

Inventory Turnover

Current Assets / Current Liabilities

Cash + Short-Term Investments + Current Receivables / Current…

Net Sales / Average Accounts Receivable, net

Cost of Goods Sold / Average Inventory

Current Ratio

Current Assets / Current Liabilities

Acid-Test Ratio

Cash + Short-Term Investments + Current Receivables / Current…

Current ratio

Acid test ratio

A/R turnover

Inventory Turnover

Current assets/current liabilities

(Cash+short term investments+current receivables)/current lia…

Net sales/avg accounts receivables

COGS/Avg inventory

Current ratio

Current assets/current liabilities

Acid test ratio

(Cash+short term investments+current receivables)/current lia…

Current Ratio

Quick Ratio

Cash Flow Liquidity

Accounts Receivable Turnover

Current Assets/Current Liabilities

(Cash+Short-Term Investments + Accounts Receivable)/Current L…

(Cash+Short-Term Investments+Cash Flow from Operations)/Curre…

Net Sales/Average Accounts Receivable

Current Ratio

Current Assets/Current Liabilities

Quick Ratio

(Cash+Short-Term Investments + Accounts Receivable)/Current L…

Gross profit ratio?

Net profit ratio?

Return on equity ratio?

Inventory turnover ratio?

Evaluates the trading profitability of the organisation

Measures the net profit generated from sales revenue

Measures a firm's profitability in terms of the return being…

This measures the number of times that an organisation has be…

Gross profit ratio?

Evaluates the trading profitability of the organisation

Net profit ratio?

Measures the net profit generated from sales revenue

Working capital

Current Ratio

Cash Ratio

Acid test Ratio (Quick Test)

Current Assets - Current liabilities ... Evaluating the ability…

Total Current Assets / Total Current Liabilities ... Evaluating…

Cash + Cash Equivalents ... Evaluating the ability to pay curren…

Cash including cash equivalents + Short Term Investments + Ne…

Working capital

Current Assets - Current liabilities ... Evaluating the ability…

Current Ratio

Total Current Assets / Total Current Liabilities ... Evaluating…

Financial ratios provide a profile of…

financial ratios allow a comparison of…

financial ratios are ............ meas…

financial ratios eliminate differences…

1. Trends/levels... 2. economic characteristics ... 3. competitive…

risk and return

relative

scale

Financial ratios provide a profile of…

1. Trends/levels... 2. economic characteristics ... 3. competitive…

financial ratios allow a comparison of…

risk and return

What are the 4 Building Blocks of Anal…

What is liquidity and efficiency?

What is solvency?

What is Profitability?

Liquidity and Efficiency, Solvency, Profitability, and Market…

the ability to meet short term obligations and efficiently ge…

the ability to generate future revenues and meet long term ob…

The ability to provide financial rewards sufficient to attrac…

What are the 4 Building Blocks of Anal…

Liquidity and Efficiency, Solvency, Profitability, and Market…

What is liquidity and efficiency?

the ability to meet short term obligations and efficiently ge…

Flexible Budget (definition)

Name two ways a Flexible Budget is used

A Static Budget is also known as a

Static Budget (definition)

A budget that changes with volume levels. It shows expected r…

1. Used as a tool to evaluate performance... 2. Provides "What I…

Master Budget

A budget based solely on the planned volume of activity

Flexible Budget (definition)

A budget that changes with volume levels. It shows expected r…

Name two ways a Flexible Budget is used

1. Used as a tool to evaluate performance... 2. Provides "What I…

Purpose of Financial Statements

Types of Information in Financial Stat…

Balance Sheet... a.k.a Statement of Finan…

Income Statement ... a.k.a Profit and Los…

Communicate financial information to decision makers

Balance Sheet... Income Statement... Cash Flow Statement

Reports the financial status of the firm at a single point in…

Reports the net income for the firm over a specific period of…

Purpose of Financial Statements

Communicate financial information to decision makers

Types of Information in Financial Stat…

Balance Sheet... Income Statement... Cash Flow Statement

Income Statement

Balance Sheet

Stockholder's Report

Statement of Cashflow

Provides a financial summary of a company's operating results…

Presents a summary of a firm's financial position at a given…

Summarizes and documents the firms financial activities durin…

Provides a summary of the firms operating, investment, and fi…

Income Statement

Provides a financial summary of a company's operating results…

Balance Sheet

Presents a summary of a firm's financial position at a given…

Balance sheet

Income statement

Cash flow statement

Types of expenses

Aka: statement of financial position... Current financial positi…

Aka: profit and loss statement... Past financial position of the…

Projected and realized inflow and outflow of cash (over a per…

1) COGS... 2) operating expenses

Balance sheet

Aka: statement of financial position... Current financial positi…

Income statement

Aka: profit and loss statement... Past financial position of the…

Types of Information in ... Financial Sta…

Balance Sheet... (aka...Statement of Fina…

Income Statement... (aka...Profit & Loss…

Cash Flow Statement

1) Balance Sheet... 2) Income Statement... 3) Cash Flow Statement

~Current financial position of the firm... ~as of a set date, e.…

~Past financial performance of the firm... ~over a period of tim…

~Projected and realized inflow and outflow of cash... ~over a pe…

Types of Information in ... Financial Sta…

1) Balance Sheet... 2) Income Statement... 3) Cash Flow Statement

Balance Sheet... (aka...Statement of Fina…

~Current financial position of the firm... ~as of a set date, e.…

What's the formula for an Income State…

What's the formula for Gross Profit?

What's the formula for EBIT?

What's the Formula for EBT

Revenue less Expenses = Net Income

Net Income less Sales and COGS

Gross Profit less Operation Expenses and Depreciation

EBIT less Interest Expenses

What's the formula for an Income State…

Revenue less Expenses = Net Income

What's the formula for Gross Profit?

Net Income less Sales and COGS

what is the ratio formula for the retu…

what is the ratio formula for return o…

what is the ratio formula for operatin…

what is the ratio formula for gross pr…

(profit after tax for the year / share capital + reserves ) x…

(operating profit / share capital + reserves + long-term liab…

(operating profit / sales revenue) x 100

(gross profit / sales revenue) x 100

what is the ratio formula for the retu…

(profit after tax for the year / share capital + reserves ) x…

what is the ratio formula for return o…

(operating profit / share capital + reserves + long-term liab…

what are the 5 main categories of rati…

what are profitability ratios?

what are efficiency ratios?

what are liquidity ratios?

1. profitability ratios ... 2. Liquidity ratios... 3. Investment ra…

- provide an insight to degree of success in creating profit…

measure the efficiency to which resources have been used.

assess the ability to meet obligations (liabilities) as they…

what are the 5 main categories of rati…

1. profitability ratios ... 2. Liquidity ratios... 3. Investment ra…

what are profitability ratios?

- provide an insight to degree of success in creating profit…

Net profit margin

Gross profit percentage

Return on total assets

Return on investments

(Net income / net revenue) X 100

(Net sales revenue - cost of goods sold) / net sales revenue

Net income / average total assets

Income / investment

Net profit margin

(Net income / net revenue) X 100

Gross profit percentage

(Net sales revenue - cost of goods sold) / net sales revenue

Net Profit Margin

Gross Profit Percentage

Asset Turnover

Receivables Turnover

(Net Income/ Total Rev) X 100

(Net Sales Rev - COGS / Net Sales Rev ) X 100

Total Revenue / Avg. Total Assets

Net Sales Rev / Avg Net Receivables (Accts rec - allowance fo…

Net Profit Margin

(Net Income/ Total Rev) X 100

Gross Profit Percentage

(Net Sales Rev - COGS / Net Sales Rev ) X 100

Working capital

current ratio

Quick ratio

Inventory turnover

Measures ability to pay current liabilities with current assets

Measures ability to pay current liabilities with current asse…

Shows ability to pay all current liabilities if they come due…

Measures number of times a company sells its average level of…

Working capital

Measures ability to pay current liabilities with current assets

current ratio

Measures ability to pay current liabilities with current asse…

Purpose of Financial Statement:... Intern…

What is the purpose to internal financ…

Purpose of Financial Statement:... Extern…

What is the purpose to external financ…

Managerial Accounting

to help business wonders and managers make decisions. It is a…

Financial Accounting

To enable other parties to determine the value, creditworthin…

Purpose of Financial Statement:... Intern…

Managerial Accounting

What is the purpose to internal financ…

to help business wonders and managers make decisions. It is a…

ratio

Cross-Sectional Analysis

Time-Series Analysis

Combined Analysis

combination of selected items from the financial statements o…

comparing the ratios of different... firms as of the same point…

comparison of a firm's ratio to its own previous ratios... Firm…

combination of cross-sectional and time-series analysis using…

ratio

combination of selected items from the financial statements o…

Cross-Sectional Analysis

comparing the ratios of different... firms as of the same point…

Inventory Turnover

Days' Sales in Inventory

Gross Profit Percentage

Accounts Receivable Turnover

Cost of Goods Sold / Average Merchandise Inventory

365 days / Inventory Turnover

Gross profit / Net sales revenue

Net Credit Sales / Average net accounts receivable

Inventory Turnover

Cost of Goods Sold / Average Merchandise Inventory

Days' Sales in Inventory

365 days / Inventory Turnover

Acid-Test Ratio... (Quick Ratio)

Average Collection Period

Inventory Turnover

Times Interest Earned

(Cash+Marketable Securities+Current Receivables)/Current Liab…

365/Accounts Receivable Turnover... Short-Term Creditors

Cost of Goods Sold/Average Inventory... Short-Term Creditors

EBIT/Interest Expense... Long-Term Creditors

Acid-Test Ratio... (Quick Ratio)

(Cash+Marketable Securities+Current Receivables)/Current Liab…

Average Collection Period

365/Accounts Receivable Turnover... Short-Term Creditors

Current Ratio

Acid-Test Ratio

Accounts Receivable Turnover

Days' Sales in Receivables

Short-term debt paying ability

Immediate short-term debt paying ability

Liquidity and efficiency of collection

Liquidity of receivables

Current Ratio

Short-term debt paying ability

Acid-Test Ratio

Immediate short-term debt paying ability

current ratio

Acid-test ratio (Quick ratio)

Accounts Receivable Turnover

Inventory Turnover

Current Assets/Current Liabilities -short term debt-paying ab…

Cash+Short Term Investments+Current Rec/Current Liabilities -…

Net Sales/ Average Accounts Receivable, net - How frequently…

Cost of Goods Sold/Average Inventory - how long a company hol…

current ratio

Current Assets/Current Liabilities -short term debt-paying ab…

Acid-test ratio (Quick ratio)

Cash+Short Term Investments+Current Rec/Current Liabilities -…

Current Ratio

Acid- Test Ratio

Receivables Turnover

Inventory Turnover

Current assets... ___________... Current Liabilities... Propotion of…

Cash+Short-term investments+ Receivables (net)... ______________…

Net Credit Sales... _____________... Average net receivables... The n…

CGS... _____________... Average Inventory... The number of times on a…

Current Ratio

Current assets... ___________... Current Liabilities... Propotion of…

Acid- Test Ratio

Cash+Short-term investments+ Receivables (net)... ______________…

What kinds of questions do Financial S…

Horizontal analysis (what looks at/ wh…

Trend Analysis (What looks at/What tel…

Why use Trend analysis over Horizontal…

- Is the organization profitable? Why or Why not?... - how effec…

What looks at: looks at the percentage change in a line item…

- compares change over a longer period of time by comparing e…

Trend analysis is based on the idea that what has happened in…

What kinds of questions do Financial S…

- Is the organization profitable? Why or Why not?... - how effec…

Horizontal analysis (what looks at/ wh…

What looks at: looks at the percentage change in a line item…

Current Ratio

Quick Ratio

Operating-cash-flow-to-current liabili…

Inventory turnover

Current Assets/Current Liabilities

(Cash+Securities+A/R)/Current Liabilities

Operating Cash Flows/Avg. Liabilities

Cost of Goods Sold/Avg. Inventory

Current Ratio

Current Assets/Current Liabilities

Quick Ratio

(Cash+Securities+A/R)/Current Liabilities

Net Profit Margin

Gross Profit Percentage

Asset Turnover

Fixed Asset Turnover

Net Income... _______________ X 100 ... Total Revenue (Profitabili…

Net Sales Revenue- Cost of Goods Sold... _______________________…

Total Revenue... _________________... Average Total Assets (profit)

Total Revenue... ________________... Average Net fixed Assets (Pro…

Net Profit Margin

Net Income... _______________ X 100 ... Total Revenue (Profitabili…

Gross Profit Percentage

Net Sales Revenue- Cost of Goods Sold... _______________________…

ROE... Return On Equity =

ROE... Return On Equity (DuPont) =

NPM... Net Profit Margin =

AT... Asset Turnover =

Net Income / Equity

Net Profit Margin x Asset Turnover x Leverage Multiplier

Net Income / Sales

Sales / Assets

ROE... Return On Equity =

Net Income / Equity

ROE... Return On Equity (DuPont) =

Net Profit Margin x Asset Turnover x Leverage Multiplier

Income Statement

Earnings per share (EPS)

Dividend per Share (DPS)

Balance Sheet

1) Sales Revenue: total dollar amount of sales during the per…

earnings available for common stockholders/# of shares outsta…

which is the dollar amount of cash distributed during the per…

1) Marketable Securities: very liquid short-term investments…

Income Statement

1) Sales Revenue: total dollar amount of sales during the per…

Earnings per share (EPS)

earnings available for common stockholders/# of shares outsta…

What are the main efficiency ratios? (5)

what is the formula for average invent…

what is the formula for average settle…

what is the formula for sales revenue…

1. Average inventories turnover period... 2. average settlement…

average inventories held / cost of sales x 365

(trade receivables / credit sales) x 365

(sales revenue / share capital + reserves + non-current liabi…

What are the main efficiency ratios? (5)

1. Average inventories turnover period... 2. average settlement…

what is the formula for average invent…

average inventories held / cost of sales x 365

factors influencing compony's potentia…

business strategy

DuPont model

product differentiation

economy-wide factors-overall health of economy (unemployment…

...

analyze the profitability of a business (idk if we need to kn…

companies offer products with unique benefits e.g. high quali…

factors influencing compony's potentia…

economy-wide factors-overall health of economy (unemployment…

business strategy

...

Purposes of Financial Statement Analysis

Users

Numbers Need Context

Issues with Peer Firms/Industries

-Examine data for obvious trends and patterns... -Attempts to il…

*Internal users-Part of SWOT analysis... *Lenders- lenders look…

Context can be:... How the numbers changed over time... Numbers in…

Some firms are very diverse. Walmart sells mostly groceries b…

Purposes of Financial Statement Analysis

-Examine data for obvious trends and patterns... -Attempts to il…

Users

*Internal users-Part of SWOT analysis... *Lenders- lenders look…