Finance Ch. 5

cash ratio

often used by investors and lender to assess and organization’s liquidity

current ratio

used to determine a company’s liquidity

debt to assets ratio

measures the portion of debt used by a company relative to the amount of stockholder’s equity

dupont method

framework for financial analysis that break return on equity down into smaller elements

earnings per share

measures the portion of a corporation’s profit allocated to each outstanding share of common stock

efficiency ratios

ratios that show how well a company uses and manages its assets

inventory turnioer

measures the number of times an average quantity of inventory was bought and sold during the period

market value ratios

measures used to assess a firm’s overall market price

operating cycle

amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer

price earnings ratio

indicates the amount investors are willing to pay for one dollar of earnings

profit margin

represents how much of sales revenue has translated into income

quick ratio

used to determine a firm’s ability to pay short term debts using its most liquid assets

return on equity

measures the company’s ability to use its assets successfully to generate a profit

solvency

implies that a company can meet its long term obligations and will likely stay in business in the future

times interest earned ratio

measures the company’s ability to pay interest expense on long term debt incurred

total asset turnover

measures the ability of a company to use its assets to generate revenues

accounts receivable turnover ratio

measures how many times in a period, usually a year, a company will collect cash from accounts recievable

days’ sales in inventory

the number of days it takes a company to turn inventory into assets