1 / 14

Accounting Systems Accounting Ratios

Accounting Systems Accounting Ratios. Parts of a Financial Statement. Statement of Income Balance Sheet Statement of Cash Flow Statement of Stockholders’ Equity. Basic Accounting Identity. Assets = Liabilities + Shareholder’s Equity. A = L + Sh Eq. 4 Basic Types of Analysis.

shoshana-klein
Download Presentation

Accounting Systems Accounting Ratios

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Accounting Systems Accounting Ratios

  2. Parts of a Financial Statement • Statement of Income • Balance Sheet • Statement of Cash Flow • Statement of Stockholders’ Equity

  3. Basic Accounting Identity • Assets = Liabilities + Shareholder’s Equity A = L + Sh Eq

  4. 4 Basic Types of Analysis • Operating or activity analysis • Liquidity analysis • Long Term and solvency analysis • Profitability analysis

  5. Operating or activity analysis • Inventory a) Turnover • b) Days’ sales in Inventory Cost of goods sold Inventory 365 days Inventory Turnover Sales Accounts Receivable • 2. Receivables a) Turnover • b) Collection Period • Payables a) Turnover • b) Payables Period • Cash Conversion Cycle = Inventory period + • Collection Period - • Payables Period • Assets Turnover 365 days Receivables Turnover Cost of goods sold Payables 365 days Payables Turnover Sales Assets

  6. Liquidity Ratios Current Assets Current Liabilities • Current ratio • Quick Ratio • Cash Ratio • Net Working Capital to Assets • Interval measure Current Assets - Inventory Current Liabilities Cash Current Liabilities Net working Capital Total assets Current Assets Average Daily Operating Costs

  7. Long term and solvency analysis Liabilities Total Assets • Total Debt Ratios a) Total Debt • b) Debt/ Equity • c) Equity Multiplier Liabilities Total Equity Total Assets Total Equity Earnings before Interest and Taxes (EBIT) Interest • Times Interest Earned • Cash Coverage EBIT + Depreciation Interest

  8. Profitability Measures • Profit Margin • Return on Assets • Return on Equity (ROE) • 4. Dupont Identity Net Income Sales Net Income Assets Net Income Equity EBIT X EBI X Net Income X Sales X Assets = EBIT EBI Net Income Sales Assets Equity Equity Tax Interest Net Margin Asset Leverage Return Burden Burden Turnover on Assets

  9. Working capital – ST Assets – ST Liabilities Working capital – 1,282 – 672 = 610

  10. Operating or activity analysis 1,679 or 872 1.93 • Inventory a) Turnover • b) Days’ sales in Inventory 365 days or 1.93 189 days 2,289 or 345 • 2. Receivables a) Turnover • b) Collection Period • Payables Turnover • Assets Turnover 6.63 55 days 365 days or 6.63 1,679 or 422 3.97 2,289 or 5,589 2.44

  11. Liquidity Ratios 1,282 672 • Current ratio • Quick Ratio • Cash Ratio • Net Working Capital to Assets • Interval measure 1.91 445 672 .67 100 672 .14 .11 610 5,589 1,282 6.09 210

  12. Long term and solvency analysis .51 2,855 5,589 • Total Debt Ratios a) Total Debt • b) Debt/ Equity • c) Equity Multiplier 1.04 2,855 2,734 5,589 2,734 2.04 Earnings before Interest and Taxes (EBIT) Interest • Times Interest Earned • Cash Coverage EBIT + Depreciation Interest

  13. Profitability Measures • Profit Margin • Return on Assets • Return on Equity (ROE) • 4. Dupont Identity 63 2,289 .03 63 5589 .01 63 2734 .02 EBIT X EBI X Net Income X Sales X Assets = EBIT EBI Net Income Sales Assets Equity Equity Tax Interest Net Margin Asset Leverage Return Burden Burden Turnover on Assets

More Related