Financial Ratios

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# Financial Ratios - PowerPoint PPT Presentation

Financial Ratios Clicker Quiz Market Price Per Share Earnings Per Share A. Inventory Turnover B. Accounts Receivable Turnover C. Price Earnings Ratio D. Debt to Equity What is this ratio? Public’s confidence in the future growth of the company Price Earnings Ratio Total Liabilities

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## PowerPoint Slideshow about 'Financial Ratios' - lotus

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### Financial Ratios

Clicker Quiz

Market Price Per Share

• Earnings Per Share
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity
What is this ratio?

Total Liabilities

• Stockholder’s Equity
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity
What is this 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
Debt to Equity Ratio

Cost of Goods Sold

• Average inventory
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity
What is this ratio?
• 4.0 Times would mean it is sold once a quarter. 12 times is once a month
Inventory Turnover

Sales on Account

• Average Accounts Receivable
• A. Inventory Turnover
• B. Accounts Receivable Turnover
• C. Price Earnings Ratio
• D. Debt to Equity
What is this ratio?
• 52 times would be once a week – 7 days
Accounts Receivable Turnover

Dividends Per Share

• Market Price Per Share
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield
What ratio is this?

Dividends Per Share

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

Dividend Payout Ratio

Net Income

• Average Total Assets
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield
What is the ratio?

How well the managers are using the assets to produce income

• We are ignoring the difference in comparable companies loans to buy the assets
Return on Assets

Net Income

• Average Stockholder’s Equity
• A. Return on Assets
• B. Dividend Payout
• C. Return on Equity
• D. Dividend Yield
What is this ratio?

Current Assets – Current Liabilities

• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital
What is the ratio?

Excess of current assets to current liabilities. Shouldn’t 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.

Working Capital

Cash, Marketable Securities, A/R, Short N/R

• Current Liabilities
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital
What is the ratio?

Should be more than 1. Measures a company’s ability to meet obligations without having to liquidate inventory.

Acid Test (Quick) Ratio

Current Assets

• Current Liabilities
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital
What is the ratio?

Common Stockholder’s Equity

• # of Common Shares Outstanding
• A. Current Ratio
• B. Book Value
• C. Quick Ratio
• D. Working Capital
What is the ratio?

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
Book Value Per Share