Finance Ratios 

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Finance

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64 Terms

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Interval measure
________: how long until more funding is needed.
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NWC turnover
________: how much work we get out of working capital.
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Dupont identity
________: weakness in operating or asset use efficiency will translate to lower ROE.
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Total asset turnover
________: depends on industry, some may be higher than others.
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total assets
Net working capital to ________: measures level of liquidity.
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Profit margin
________: how much profit a firm makes from a sale (how well a company makes money)
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Times interest
________ earned ratio: how well a company can pay its interest bills.
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Price earnings ratio
________: how much a share sells times its earnings.
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Long term debt ratio
________: looking for a lower number less than 0.5.
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Cash ratio
________: looking for a number around .5 and above.
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Quick ratio
________: what you can really pay bills with right now, current assets minus inventory.
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Total debt ratio
________: amount of debt for every dollar.
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Cash coverage ratio
________: how well a company can pay interest with cash.
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Dupont identity
________: ROE can be leveraged up by increasing amount of debt in firm, but overall reduces ROE due to interest.
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total assets
Net working capital to ________: higher number means more liquid, lower number means less liquid.
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NWC turnover
________: looking for a higher number.
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Cash ratio
________: amount of liabilities can be met with cash only.
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Dupont identity
________: breaks ROE into 3 parts.
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Dupont identity
________: operating efficiency, asset use efficiency, financial leverage.
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Dupont identity
________: profit margin, total asset turnover, equity multiplier.
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working capital
positive number
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working capital
a measure of liquidity, meet obligations and take advantage of new opportunities
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current ratio
goal is 2-3 depending on industry
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current ratio
meaning how many times over firm can meet current liabilities
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quick ratio
goal is 1 or close to
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quick ratio
what you can really pay bills with right now, current assets minus inventory
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cash ratio
important for short term creditor
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cash ratio
amount of liabilities can be met with cash only
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cash ratio
looking for a number around .5 and above
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net working capital to total assets
measures level of liquidity
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net working capital to total assets
higher number means more liquid, lower number means less liquid
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interval measure
how long until more funding is needed
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total debt ratio
amount of debt for every dollar
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total debt ratio
lower number is better
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debt-equity ratio
amount of debt to equity
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equity multiplier
debt equity + 1
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long term debt ratio
also called total capitalization
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long term debt ratio
looking for a lower number less than 0.5
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times interest earned ratio
how well a company can pay its interest bills
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TIE ratio
greater than 2.5 is acceptable risk, lower is more at risk for bankruptcy and default
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cash coverage ratio
similar to TIE but adds back depreciation
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cash coverage ratio
how well a company can pay interest with cash
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inventory turnover ratio
how many times inventory is turned over
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inventory turnover ratio
higher number means more efficient, also depends on industry
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days in sale inventory
how long inventory is sitting before it is turned over, depends on industry
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receivable turnover
how fast we collect on sales
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days sales in receivables
how many days sales sits in account before cash is collected
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NWC turnover
how much work we get out of working capital
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NWC turnover
looking for a higher number
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fixed asset turnover
for every dollar of fixed asset, how much sales is generated
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total asset turnover
for every dollar of total asset, how much sales are generated
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total asset turnover
depends on industry, some may be higher than others
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profit margin
how much profit a firm makes from a sale (how well a company makes money)
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profit margin
small doesnt always mean bad, widely depends on industry
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return on assets
measure of profit per dollar of asset
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return on equity
measure of stockholders profit
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price earnings ratio
how much a share sells times its earnings
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price earnings ratio
varies by industry and country until growth is factored in
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market to book ratio
compares market value of share to its historical cost
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dupont identity
breaks ROE into 3 parts
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dupont identity
operating efficiency, asset use efficiency, financial leverage
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dupont identity
profit margin, total asset turnover, equity multiplier
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dupont identity
weakness in operating or asset use efficiency will translate to lower ROE
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dupont identity
ROE can be leveraged up by increasing amount of debt in firm, but overall reduces ROE due to interest