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MGT220H5 Study Guide - Final Guide: Debt Service Coverage Ratio, Christopher Small, Net Income


Department
Management
Course Code
MGT220H5
Professor
Christopher Small
Study Guide
Final

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Prof. Christopher Small MGT220 Page 1 of 2
Financial Ratios Exam Review
Financial Ratios Exam Review
LIQUIDITY RATIOS
Ideal
Name
Formula
What it Measures
1.5 to
3%
Current
Ratio
Current Assets
Current Liabilities
Short-term debt-
paying ability
1.0 ↑
Quick/Acid
Test Ratios
Cash,Marketable Securities,and Receivables (net)
Current Liabilities
Immediate short-term
liquidity
1.5 ↑
Current
Cash Debt
Coverage
Ratio
Net Cash Provided by Operating Activities
Average Current Liabilities (net)
Companys ability to
pay off its current
liabilities in specific
year from its
operations
ACTIVITY
Ideal
Name
Formula
What it Measures
Depends Receivables
Turnover
Net Sales
Average Trade Receivables
Liquidity of receivables
Inventory
Turnover
Cost of Goods Sold
Average Inventory
Liquidity of inventory
Depends Asset
Turnover
Net Sales
Average Total Assets
How efficiently assets are
used to generate sales
PROFITABILITY
Ideal
Formula
What it Measures
Profit Margin
on Sales
Net Income
Net Sales
Net income generated by
each dollar of sales
5%
on Assets
Net Income
Average Total Assets
Overall profitability of assets
15%
on Common
Net Income Preferred Dividends
Average Common Shareholders'Equity
Profitability of owners
investment
Earnings per
Share
Net Income Preferred Dividends
Weighted Average Shares Outstanding
Net income earned on each
common share
Depends Price Earnings
Ratio
Market Price of Shares
Earnings per Share
Ratio of the market price per
share to earnings per share
Depends Payout Ratio
Cash Dividends
Net Income
Percentage of earnings
distributed as cash dividends
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