Chapter 13 ratios

accounts receivable turnover ratio

net credit sales/ average net accounts receivable

Free Cash Flow

Cash Provided by Operating Activities - capital expenditures - cash dividends = Free Cash Flow Free cash flow is the amount of excess cash generated after investing to maintain current productive capacity and paying dividends. Solvency

Working Capital

Current Assets - Current Liabilities Liquidity Ratio Liquidity

Current Ratio

Current Assets/Current Liabilities Liquidity

Gross Profit Rate

Gross Profit/Net Sales (Gross Profit = net sales - COGS) Indicates a company's ability to maintain an adequate selling price above its costs. Profitability

Profit Margin Ratio

Net Income/Net Sales The return on assets ratio is affected by two factors, the first of which is the profit margin ratio. A measure of the percentage of each dollar of sales that results in net income. Profitability