B A 323 Chapter Notes - Chapter 3: Inventory Turnover, Asset Turnover, Reserve Requirement
17 Jul 2018
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Common-size statements: using percentages instead of total dollars. Financial ratios: 1) short-term solvency, or liquidity, ratios. Quick ratio: used to further evaluate liquidity; the quick or acid-test ratio. = current assets - inventory / current liabilities. Using cash to buy inventory doesn"t affect the current ratio, but it does reduce the quick ratio. Total debt ratio: takes into account all debts of all maturities to all creditors. = total assets - total equity / total assets. Debt-equity ratio: = total debt / total equity. Equity multiplier: = total assets / total equity. Times interest earned (tie) ratio: measures how well a company has its interest obligations covered = ebit / interest. Cash coverage ratio: = ebit + depreciation / interest. Receivables turnover: how many times in one year you collect outstanding credit accounts and relined money. Days" sales in receivables (average collection period acp): how often you collect credit sales.
