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Karen Conger

Annual Report This ratio is calculated by dividing sales by inventories
Balance sheet The ratio of sales to net fixed assets
Working capital The average time required to convert raw materials into finished goods and then to sell them
Income statement Earnings before interest, taxes, depreciation, and amortization
Operating income (EBIT) A statement of a firm's financial position at a specific point in time
Net working capital A set of ratios that measure how effectively a firm is managing its assets
Statement of cash flows This ratio is calculated by dividing sales by total assets
depreciation Current assets minus accounts payable and accruals
Amortization The ratio of net income to common equity; measures the rate of return on common stockholders' investment
EBITDA Holdings of cash, marketable securities, inventories, and receivables are constrained
Statement of Stockholders Equity This ratio measures net income per dollar of sales and is calculatedby dividing net income by sales
Free Cash Flow This ratio indicates the ability of the firm's assets to generate operating income; it is calculated by dividing EBIT by total assets
liquid asset The ratio of the net income to total assets
Liquidity ratios A noncash charge similar to depreciation except it is used to write off the costs of intangible assets
Current ratio The charge to reflect the cost of assets used up in the production process. This is not a cash outlay
Quick (acid test) ratio A financing policy that matches aset and liability maturities. This is a moderate policy
asset management ratios This ratio is calculated by deducting inventories from current assets and then dividing the remainder by current liabilities
Inventory turnover ratio The amount of cash that could be withdrawn from a firm without harming its ability to operate and to produce future cash flows
Days sales outstanding (DSO) This ratio is calcualted by dividing current assets by current liabilitities. It indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future
Fixed assets turnover ratio The average length of time required to convert the firm's receivables into cash, that is, to collect cash following a sale
Total assets turnover ratio A report summarizing a firm's revenues, expenses, and profits during a reporting period, generally a quarter or a year
Debt management ratios Earnings from operations before interest and taxes
debt ratio The ratio of earnings before interest and taxes (EBIT) to interest charges; a measure fo the firm's ability to meet it's annual interest payments
Times-Interest-Earned (TIE) ratio A statement that shows by how much a firm's equity changed during the year and why this change occurred
Profitability ratios An analysis of a firm's financil ratios over time; used to estimate the likelihood of imporvement or deterioration in its financial condition
Oerating margin The way current assets are financed
Profit margin Current assets
Return on Total Assets (ROA) This ratio measures operating income, or EBIT, per dollar of sales; it is calculated by dividing operating income by sales
Basic Earning Power ratio (BEP) The process of comparing a particular company with a set of benchmark companies
Return on common equity (ROE) A report that shows how things that affect the balance sheet and income statement affect the firm's cash flows
Trend Analysis A group of ratios that show the combined effects of liquidity, asset management, and debt on operating results
DuPont Equation Current assets that a firm must carry even at the trough of its cycles
Benchmarking A formula that shows that the rate fo return on equity can be found as the product of net profit margin, total assets turnover, and the equity multiplier. It shows the relationships among asset managemetn, debt management, and profitability ratios
"Window Dressing" Techniques Techniques employed by firms to make their financial statements look better than they really are
Relaxed Current Asset Policy Relatively large amounts of cash, marketable securities, and inventories are carried; and a lliberal credit policy results in a high level of receivables
Restricted current asset policy The ratio of total debt to total assets
Moderate current asset policy This ratio is calculated by dividing acounts receivable by aver sales per day; it indicates the average length of time the firm must wait after making a sale before it receives cash
Permanent current assets Betwen the relaxed and restricted policies
Temporary current assets The length of time funds are tied up in working capital or the length of time between paying for working capital and collecting cash from the sale of the working capital
Current Asset Financing policy A set of ratios that measure how effectiely a firm manages its debt
Maturity matching, or self-liquidating approach Ratios that show the relationship of a firm's cash and other current assets to its current liabilities
Cash Covnersion Cycle (CCC) A report issued annually by a corporation to its stockholders. It contains basic financial statements as well as management's analysis of the firm's past operations and future prospects
Inventory conversion period The average length of time betwent he purchase of materials and labor and the payment of cash for them
Averae collection period (ACP) an asset that can be converted to cash quickly without having to reduce the asset's price very much
Payables deferral period Current assets that fluctuate with seasonal or cyclical variations in sales

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