BUS 420 Chapter Notes - Chapter 7: Trend Analysis, Preferred Stock, International Business
20 Jul 2020
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Involves: comparing a firm"s performance with that of other firms in the same industry and evaluating trends in the firm"s financial position over time. Quick ratio (acid test ratio) = current assets - inventories / current liabilities. Determine the efficiency with which a company manages its day to day tasks and assets. Total assets turnover ratio measures the dollars in sales that are generated for each dollar that is tied up in measures the turnover of all the firm"s assets = sales / total assets. Fixed assets turnover ratio measures how effectively the firm uses its plant and equipment. Inflation can be a problem here b/c fixed assets are reported using historical costs, not current that may have changed with inflation. Days sales outstanding dso: average number of days from sale until cash received. Dso = receivables / average sales per day. Inventory turnover ratio = sales / inventories (or cogs / inventories)
