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Ch. 13

Working Capital Measures the company’s ability to repay current liabilities using only current assets
Current ratio Test of short-term debt-paying ability
Acid-test ratio Test of short-term debt-paying ability without having to rely on inventory
Accounts receivable turnover Measures how many times a company’s accounts receivable have been turned into cash during the year
Average collection period Measures the average number of days taken to collect an account receivable
Inventory turnover Measures how many times a company’s inventory has been sold during the year
Average sale period Measures the average number of days taken to sell the inventory one time
Operating cycle Measures the elapsed time from when inventory is received from suppliers to when cash is received from customers
Total asset turnover Measures how efficiently assets are being used to generate sales
Times interest earned Measures the company’s ability to make interest payments
Debt-to-equity ratio Measures the amount of assets being provided by creditors for each dollar of assets being provided by the stockholders
Equity multiplier Measures the portion of a company’s assets funded by equity
Gross margin percentage Measures profitability before selling and administrative expenses
Net profit margin percentage A broad measure of profitability
Return on total assets Measures how well assets have been employed by management
Return on equity When compared to the return on total assets, measures the extent to which financial leverage is working for or against common stockholders
Earnings per share Affects the market price per share, as reflected in the price-earnings ratio
Price-earnings ratio An index of whether a stock is relatively cheap or relatively expensive in relation to current earnings
Dividend payout ratio An index showing whether a company pays out most of its earnings in dividends or reinvests the earnings internally
Dividend yield ratio Shows the return in terms of cash dividends being provided by a stock
Book value per share Measures the amount that would be distributed to common stockholders if all assets were sold at their balance sheet carrying amounts and if all creditors were paid off
Created by: mpiontek