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Chapter 3

FIN 300 Chapter Notes - Chapter 3: Shane Price, Gross Margin, Making Money


Department
Finance
Course Code
FIN 300
Professor
Laleh Samarbakhsh
Chapter
3

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CHAPTER 3: WORKING WITH FINANCIAL STATEMENTS


o 
o!
"#$%
$
oCash Flow from Assets = Cash Flow to Creditors + Cash
Flow to Shareholders
&
'&!
"()
&%
!!
*%
+%%
!!
o!!

,-Cash 2011 / Total Assets 2011 = %
o,!
,-COGS 2012 / Sales 2012 = %
+.+/%
!)$
o,-*0)$$1
$2345$$)
)$236**73410859
"$)$8:$
o!$)$)$
2,-3;8;73418*98*:5
<$
<!&
!!!
<%!)!
!!
+$=$>
An increase in assets or a decrease in liabilities is
a use of cash
A decrease in assets or an increase in liabilities is
a source of cash
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?$&)$!$)

@+
Current Ratio = Current Assets / Current Liabilities
o,-380A73B60193
$3)
o=$)
C+
Quick (Acid Test) Ratio =
Current AssetsInventory
Current Liabilities
o+)$)
)!
$
@=$
oCash Ratio =
Cash+Cash Equivalents
Current Liabilities
oNet Working Capital to Total Assets =
Net Working Capital
Total Assets
$=$
oInterval Measure =
Current Assets
Average Daily Operating Costs
+"$>
&)$)

Total Debt Ratio =
Total AssetsTotal Equity
Total Assets
o")
o,-23BAA+3*B4*573BAA10*A*A:
"30*A)$3
"308*=$$30*A
)
oDebt/Equity Ratio =
Total Debt
Total Equity
,-30*A7308*104
oEquity Multiplier =
Total Assets
Total Equity
,-37308*14
"=$!DE)7-=$
Long-Term Debt Ratio =
o,-36B87236B8D3*B4510B
o"!%+"E)D"-=$
Times Interest Earned Ratio =
EBIT
Interest
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