Ratios 1

Flashcards covering key terms and concepts from the lecture on evaluating a firm's financial performance.

Ratio Analysis

A quantitative analysis of financial ratios used to assess a firm's performance.

Operating Profit Margin

A measure of the proportion of revenue remaining after accounting for operating expenses.

Return on Equity (ROE)

A measure of financial performance calculated by dividing net income by shareholders' equity.

Gross Income

Revenues minus direct costs of goods sold.

Net Income

Total revenue after all expenses, taxes, and costs have been deducted.

Debt Ratio

The ratio indicating the percentage of a firm's assets that are financed by debt.

Times Interest Earned

A measure of a firm's ability to meet its debt obligations, calculated by dividing operating income by interest expense.

Price/Earnings Ratio

A valuation ratio calculated by dividing the market value per share by earnings per share.

Total Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.

Fixed Asset Turnover

A financial ratio that measures how efficiently a company uses its fixed assets to generate sales.

Economic Value Added (EVA)

A measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit.

Accounts Receivable Turnover Ratio

A measure of how effectively a firm uses its assets by showing how many times the firm collects its average accounts receivable during a period.

Acid-Test Ratio (Quick Ratio)

A liquidity ratio that measures a company's ability to pay off current liabilities without relying on the sale of inventory.

Operating Return on Assets (OROA)

A measure of how much profit a company generates from its assets.

Current Ratio

A liquidity ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets.

Days in Inventory

A measure of how long it takes to turn inventory into sales.