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18 Cards in this Set
- Front
- Back
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Five Types of Financial Ratios
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Debt Management
Liquidity Asset Management Profitability Market Trend |
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Debt Management Ratios
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Ratios that show how a firm uses debt financing and its ability to meet debt repayment obligations. There are two debt management ratios: Debt Ratio and Times-interest Earned Ratio
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Debt Ratio
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The risk the lender will not get their principle back from the borrower.
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Times Interest Earned Ratio
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Probability that the owner will be able to make a payment.
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Liquidity Ratios
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Ratios that show the relationship of a firm's cash and other assets to its current liabilities. These include the Current Ratio and the Quick Ratio.
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Current Ratio
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Probability that the firm will either sell an assets or take out a loan in the near future.
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Quick Ratio
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Probability of the firm paying its all current liabilities if due immediately.
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Asset Management ratios
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A set of ratios which measure how effectively a firm is managing its assets. These include: Inventory Turnover ratio, Day's Sales outstanding ratio( aka Accounts Receivable Turnover), and the Total assets turnover ratio.
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Working Capital
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The amount of money that a company has to work with after it pays all of its current liabilities.
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Inventory Turnover
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Probability of filling a large one-time order.
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Day's Sales Outstanding (Accounts Receivable Turnover)
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Measures the amount of credit that a business has extended to its customers and the efficiency of its collection department.
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Total Asset Turnover
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The probability that a firm can fill a persistent increase in sales.
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Profitability ratios
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A set of ratios which show the combined effect of liquidity, asset management, and debt on operating results. Profitability ratios include the profit margin on sales, the return on total assets, and the return on common equity.
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Return on Total Assets
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This is essentially an interest rate that tells investors and managers how the well the assets in the firms are generating cash flow (incoming).
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Return on Common Equity
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Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.
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Market Trend
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A set of ratios that relate the firm's stock prices to its earning and book value per share. This includes the P/E Ratio (Price to Earning Ratio) and the Market or Book Value Ratio.
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Price/Earnings Ratio
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The opportunity cost from a potential investors point of view.
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Book Value Per Share
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If the firm had a fire sale of everything, this ratio shows what each owner would get per share of the stock that they owned.
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