# Shared Flashcard Set

## Details

Financial Planning and Management
Caculations
20
02/23/2010

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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