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6. Debt to Tangible Net Worth Total Liabilities more conservative measure of long-term debt payment
Ratio Equity- intangible assets ability than the debt ratio or debt-equity ratio
margin of safety for payment of fixed interest charges
EBIT - extent to which operations cover interest expense
7. Times Interest- Earned Ratio or
Interest Expense
Interest Coverage Ratio - the higher the TIE is = solvent ; company can afford
to pay all of its expenses and still has a large income
Total Liabilities compare resources provided by creditors with
8.Debt-Equity Ratio Equity resources provided by shareholders
EBIT + Interest portion of
9. Fixed charge coverage ratio or operating leases
EARNINGS TO FIXED Margin of safety of payment of all fixed charges
Interest + Interest portion of
CHANGES RATIO operating leases
10. Operating cash flow to total Operating cash flow portion of total liabilities that can be paid out of the
debt ratio Total debt cash flows from operations
ASSET MANAGEMENT RATIOS- how the firm uses its assets to generate revenue and income
indicates if a firm holds excessive stock of inventories
that are unproductive and that lessen the companys
1. Finished Goods or COGS profitability
Merchandise Inventory Turnover Average Inventory
AVERAGE INVENTORY= (Beg. + End) / 2
Number of Days in a Yr (360)
Inventory Turnover
Average # of days that inventory is held before sale
2. Average Age Of Inventories or
- higher turnover and short average age of inventories
Number of days of inventory Average Inventory
is desirable
Average daily COGS
6. Average Age of Accounts Average Accounts Payable Determine whether the firm is paying its invoices on a
Payable Average Daily Purchases timely basis
Net Credit Purchases
Payables Turnover length of time which trade payables remain unpaid
Average Trade Payables
Number of Days in a Yr (360)
Average Age of TP Payables Turnover
Net Sales
7. Fixed Assets Turnover Ratio level of use of PPE
Average Net Fixed Assets
Net Sales
8. Total Assets Turnover Ratio level of investment relative to sales volume
Average Total Assers
Net sales
Total Capital
level of total assets having explicit costs relative to
Total Capital Turnover Ratio Total Capital = total assets having sales volutme
explicit costs (Equity + interest-
bearing debt)
Total Capital, 200B - Total
10. Investment Rate Capital, 200A % Change in total capital
Total Capital, 200A