Chapter 3 - WORKING WITH FINANCIAL STATEMENTS

Quick Ratio

(Current Assets - Inventory) / Current Liabilities

Cash Coverage Ratio

(EBIT + Depreciation) / Interest

Total Debt Ratio

(Total Assets - Total Equity) / Total Assets

A useful way of standardizing financial statements is to choose a _______ year and then express each item relative to that amount.

Base

Source of Cash

Decrease in Inventory

times interest earned ratio

EBIT/Interest

Common size income statements show balance sheet items as a percentage of current assets.

False

calculate net cash increase/decrease

Leave beginning cash out of it

Return on Equity

Net Income / Average Stockholders' Equity

Return on Equity

ROE = ROA x (1 + Debt - Equity Ratio)

DuPont Identity

ROE = profit margin x total asset turnover x equity multiplier

The Statement of Cash Flows has all of the following categories, except:

Standard

Return on Assets

net income/average total assets

Ratios that measure a firm's liquidity are known as ______ ratios.

short-term solvency

During the year, the accounts payable of a company rose from $115,200 to $134,300. This change represents a: Multiple

source of $19,100 of cash as an operating activity.

The sources and uses of cash over a stated period of time are reflected on the:

statement of cash flows