Module 2 FIN701

A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:

$.53 in total equity

Short-Term Solvency Ratios

-provide info about a firms LIQUIDITY -Important to Short-Term Creditors -Reflect ability to pay bills in the short run without undue stress -Also called Liquidity Measures

Ratios that measure how efficiently a firm uses its assets to generate sales are know as ______ratios.

Asset Management Ratios

A supplier, who requires payment within ten days, should be most concerned with the _____ratio when granting credit.

CASH

From a cash flow position, which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Cash Coverage Ratio

Which statement expresses all accounts as a PERCENTAGE of total assets?

Common-Size balance sheet

This method separates accounts that vary with sales from those that do not vary with sales

Extended Version of Percentage

An increase is which account increases a firm's current ratio without affecting its quick ratio?

Inventory

Ratios that measure a firm's financial leverage are known as ______ratios.

LONG TERM Solvency Ratios

Ratios that measure a firm's ability to pay its bills over the SHORT RUN without undue stress are known as:

Liquidity Measures (A Short Run Solvency)

A banker considering loaning money to a firm for ten years would most likely prefer the firm to have a __________DEBT RATIO and a times interest ratio of ______:

Lowest Debt to Highest Interest

The long-term debt ratio is probably of most interest to a firms:

Mortgage Holder

The amount that investors are willing to pay for each dollar of annual earnings is reflected in the:

Price-earnings ratio

Ratios that measure how efficiently a firm's management uses its ASSETS AND EQUITY to generate bottom line net income are known as _____ratios.

Profitability Ratios

What type of ratio is a LIQUIDITY RATIO

Quick Ratio

The measure of net income returned from every dollar invested in total assets is the:

Return on assets

The financial ratio that measures the accounting profit per dollar of book equity is referred to as the:

Return on equity

A ratio that is also called a Liquidity Measure

Short-Term Solvency Ratio

The higher the inventory turnover, the

less time inventory spends on the shelf.

Projected Future Financial Statements are called...

pro forma statements