Financial Ratios

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Financial Ratios

• Clicker Quiz

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What is this ratio?

• Market Price Per Share
• Earnings Per Share
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity

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Price Earnings Ratio

• Publics confidence in the future growth of the
  company

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What is this ratio?

• Total Liabilities
• Stockholders Equity
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity

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Debt to Equity Ratio

• Proportions of debt to equity
• Stockholders like it more than 1 since they will
  have more control
• Creditors would like it less than 1 since the
  company is financed more by owners than creditors

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What is this ratio?

• Cost of Goods Sold
• Average inventory
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity

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Inventory Turnover

• How many times inventory has been bought and sold
  during the year.
• 4.0 Times would mean it is sold once a quarter.
  12 times is once a month

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What is this ratio?

• Sales on Account
• Average Accounts Receivable
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity

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Accounts Receivable Turnover

• How many times a company converts its receivables
  into cash each year.
• 52 times would be once a week 7 days

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What ratio is this?

• Dividends Per Share
• Market Price Per Share
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield

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Dividend Yield Ratio

• Return (dividends) on current market price of the
  stock

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What is the ratio?

• Dividends Per Share
• Earnings Per Share
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield

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Dividend Payout Ratio

• Portion of current earnings being paid out in
  dividends. Investors for dividends want this to
  be a large . Investors seeking market price
  increase would like it to be small.

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What is the ratio?

• Net Income
• Average Total Assets
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield

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Return on Assets

• How well the managers are using the assets to
  produce income
• We are ignoring the difference in comparable
  companies loans to buy the assets

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What is this ratio?

• Net Income
• Average Stockholders Equity
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield

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Return on Stockholders Equity

• Measures how well the company used the owners
  investments to earn income

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What is the ratio?

• Current Assets Current Liabilities
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital

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Working Capital

• Excess of current assets to current liabilities.
  Shouldnt have too much because you are not
  making your money work for you or you might have
  borrowed too much and are paying too much
  interest.

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What is the ratio?

• Cash, Marketable Securities, A/R, Short N/R
• Current Liabilities
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital

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Acid Test (Quick) Ratio

• Should be more than 1. Measures a companys
  ability to meet obligations without having to
  liquidate inventory.

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What is the ratio?

• Current Assets
• Current Liabilities
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital

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Current Ratio

• Measures companys short term debt paying
  ability.
• 2 is a good number

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What is the ratio?

• Common Stockholders Equity
• of Common Shares Outstanding
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital

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Book Value Per Share

• Amount to be distributed to holders of each share
  of common stock if all assets were sold at their
  balance sheet carrying amounts after all
  creditors were paid off.
• Does not equal market value.
• Market Value represents future whereas book value
  represents historical