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Ch. 13

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