Shared Flashcard Set

Details

Financial Planning and Management
Caculations
20
Business
12th Grade
02/23/2010

Additional Business Flashcards

 


 

Cards

Term

 

Owners Equity

Definition

 

Owners Equity = Assets - Liabilities

 

(OE = A - L)

Term

 

Liquidty -

Current Ratio

Definition

 

Current Ratio =

 

Current Assets


Current Liabilites

Term

 

Current Ratio -

What Does It Mean?

Definition

 

i.e. 0.35:1

for every $1 of short-term debt, there is 35 cents to pay that debt

Term

 

Solvency -

The Gearing Ratio

 

Definition

 

 

The Gearing Ratio =

 

Non-current Liabilities x 100 


 Owners' Equity

Term

 

Gearing Ratio -

What Does It Mean?

Definition

i.e. 47%

long-term debt as a % of owners' equity is 47%.

  • A Rule of Thumb:

60% regarded satisfactory level of debt

Term

 

Solvency -

The Gearing or Equity Ratio

Definition

 

Gearing or Equity Ratio =

 

Total Liabilities x100


 Total Assets

Term

 

Gearing or Equity Ratio-

What Does It Mean?

Definition
should be the same as the industry average or lower
Term

 

Solvency -

Debt to Equity Ratio

Definition

 

Debt to Equity Ratio =

 

Total Liabilities x 100


 Equitity Funds

Term

 

Debt to Equity Ratio-

What Does It Mean?

Definition
high ratio indicated high geating and therefore a high risk - should be less than 100%
Term

 

Profitability -

Gross Profit Ratio

 

Definition

 

Gross Profit Ratio =

 

Gross Profit x 100 


 Sales

Term

 

Gross Profit Ratio -

What Does It Mean?

Definition

i.e. 85%

85¢ out of every dollar of sales stays w/in the business and 15¢ of every dollar goes to pay for goods

Term

 

Profitability -

Net Profit Ratio

Definition

 

Net Profit Ratio =

 

Net Profit x 100 


Sales

Term

 

Net Profit Ratio -

What Does It Mean?

Definition

i.e. 29%

for every $1 of sales, 29¢ stay in the business after all the expenses have been paid

Term

 

Profitability -

Return on Owners Equity Ratio

Definition

 

Return of Owners Equity Ratio =

 

Net Proftit x 100 


 Owners' Equity

Term

 

Return on Owners Equity Ratio -

What Does It Mean?

Definition

i.e. 43%

for every $1 of ownership in the business, the owner/investor is getting a return of 43¢

Term

 

Efficiency-

Total Operating Expenses Ratio

Definition

 

Total Operating Expenses Ratio =

 

Total Operating Expenses x 100 


Sales

Term

 

Efficiency-

Accounts Receivable Tunrover Ratio

Definition

 

Accounts Receivable Turnover Ratio =

 

Accounts Receivable 


Average Sales per Day

Term

 

Accounts Receivable Turnover Ratio-

What Does It Mean?

Definition

i.e. 80 days

it takes on average 80 days to collect customer debts.

  • Effective business would ensure debts are repaid within 30 days
Term

 

Efficiency-

Expense Ratio

Definition

 

Expense Ratio =

 

Total Expenses x 100


Sales

Term

 

Expense Ratio-

What Does It Mean?

Definition
used to determine the proportion of each dollar earned that is absorbed by expenses
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