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31 Cards in this Set
- Front
- Back
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Return on Total Assets(ROA) |
Net Income/ Total Assets; Profit Margin*Total Asset Turnover; ratio of net income to total assets |
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Return on Common Equity(ROE) |
Net income/Common Equity; The ratio of net income to common equity; measures the rate of return on common stockholders' investment. |
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Profit Margin; Net Profit Margin(NPM) |
Net income/Sales; measures net income per dollar of sales and is calculated by dividing net income by sales. |
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Total Asset Turnover Ratio(TAT) |
Sales/Total Assets; Return on Total Assets/Profit Margin |
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Equity Multiplier(EM) |
Total Assets/Common Equity; ROE/ROA |
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Book Value per share |
Common Equity/Shares outstanding |
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Market/Book(M/B) Ratio |
Market price per share/Book value per share; Ratio of a stock's market price to its book value. |
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Price Earnings(P/E) Ratio |
Price per share/Earnings per share; ratio of price per share to earnings per share ; shows the dollar amounts investors will pay for 1 dollar of current earnings |
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Earnings Per Share |
Net Income-Dividends on Preferred Stock/Average Outstanding Shares |
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Total Debt to Total Capital(Debt Ratio) |
Total Debt/Total Capital= Total Debt/Total Debt+Equity |
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Current Ratio |
Current Assets/ Current Liabilities; Indicates the extend to which current liabilities are covered by those assets expected to be converted to cash in the near future. |
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Quick Ratio |
Current Assets-Inventories/Current Liabilities |
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Basic Earning Power(BEP) |
EBIT/Total Assets; This ratio indicates the ability of the firm's assets to generate operating income. |
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Total Debt to Asset Ratio |
Total Liabilities/ Total Assets |
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Inventory Turnover Ratio |
Sales/Inventories |
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Days Sales Outstanding(DSO) ratio |
Receivables _________________ Annual Sales/365; Indicates the length of time the firm must wait after making a sale before it receives cash |
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Window Dressing Techniques |
Techniques employed by firms to make their financial statements look better than they really are. |
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Trend Analysis |
An analysis of a firm's financial ratios over time; used to estimate the likelihood of improvement or deterioration in its financial condition. |
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Benchmarking |
The process of comparing a particular company with a subset of top competitors in their industry. |
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DuPoint Equation |
A formula that shows the ROE can be found as a product of NPM, TAT, and the EM. It shows the relationship among asset management, debt management, and profitability ratios. |
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Market Value Ratios |
Ratios that relate a firm's stock price to its earnings and book value per share. |
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Return on Invested Capital(ROIC) |
EBIT(1-T)/ Total Invested Capital; The ratio of AT operating income to total invested capital; measures the total return that the company has provided for investors. |
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Operating Margin |
EBIT/Sales; Measures operating income, or EBIT, per dollar of sales |
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Profitability ratios |
A group of ratios that show the combined effects of liquidity, asset management, and debt on operating results. |
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Times Interest Earned(TIE) Ratio |
EBIT/Interest Charges; ratio of EBIT to interest charges; a measure of a firm's ability to meet its annual interest payments. |
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Total debt to Total Capital
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Total Debt/Total Capital= Total Debt/ Total Debt+Equity; ratio of total debt to total capital |
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Debt Management Ratios |
A set of ratios that measure how effectively a firm manages its debts. |
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Fixed Assets Turnover Ratio |
Sales/Net Fixed Assets; measures how effectively a firm uses its plant assets |
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Asset Management Ratios |
A set of ratios that measure how effectively a firm is managing its assets. |
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Liquidity Ratios |
Ratios that shows the current relationships between a firm's cash and other current assets to its current liabilities.
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Liquid Asset |
An asset that can be converted to cash quickly without having to reduce the asset's price very much. |
