Financial statements are the prime source of information about a firm's financial health. Divided EBITDA multiple is equal to the enterprise value Asset The ROE equals the net profit margin multiplied by the total _ turnover multiplied by the equity multiplier. the PE ratio The EBITDA ratio is similar in spirit to: DuPont The _ identity can help to explain why two firms with the same return on equity may not be operating in the same way. False True or false: Enterprise value equals total market value of the stock plus the book value of the liabilities plus cash. less than 1 If management has been unsuccessful at creating value for the company's stockholders, the market-to-book ratio will be _. Higher A _ PE ratio may indicate that investors believe a company has better prospects for future growth in earnings. market value The price-earnings (PE) ratio is a _ ratio. higher When the typical stock in the S&P 500 Index has a PE ratio 12, a company with a PE ratio of 15 may have _ than average growth prospects, given similar earnings per share. long-term debt Total capitalization equals total equity plus total: times interest earned ratio EBIT divided by Interest cash coverage ratio (EBIT+ Non-cash expenses)/Interest expense inventory turnover ratio Cost of goods sold/Inventory Increase If sales increase while there is no change in accounts receivable, the receivables turnover ratio will Sales The profit margin is equal to net income divided by Receivables turnover ratio Sales/Accounts receivable income statement The information needed to compute the profit margin can be found on the _. Turnover The inventory _ is calculated as the COGS divided by the inventory. total equity Both the debt-equity ratio and the equity multiplier are calculated using _ in the denominator. depreciation The cash coverage ratio adds _ to operating earnings (EBIT) for a better of measure of how much cash is available to meet interest obligations. earnings before interest and taxes A times interest earned (TIE) ratio of 3.5 times means a firm has _ that is(are) 3.5 times greater than the firm's interest expense. Total Equity Formula total equity + long-term debt. Equity The debt-equity ratio expresses the total debt divided by total equity, while the _ multiplier expresses the total assets divided by the total equity. This means the firm has _ in total debt for every $1 in total assets. $0.30 A firm has a total debt ratio of 0.30 times. it needs another round of financing The interval measure is useful for start-up companies because it indicates how long a company can operate until _. less than If a company has inventory, the quick ratio will always be _ the current ratio. true True or false: The interval measure indicates how long a start-up company can operate until it needs more financing. cash ratio found by dividing cash by current liabilities. What does a current ratio of 1.2 mean? current The quick ratio is computed just like the _ ratio, except that inventory is omitted. The firm has $1.20 in current assets for every $1 in current liabilities. current assets and current liabilities The current ratio shows the relationship between _. What will happen to the current ratio if current assets increase, while everything else remains unchanged? Market The five categories of financial ratios include short-term solvency, long-term solvency, asset management, profitability, and _ value ratios. common size statements When combining common-size and common-base year analysis, the effect of overall growth in assets can be eliminated by first forming the: Cash & Accounts payable Which of the following items are among the items used to compute the current ratio? It will increase. ![]() Market value ratios dollar amount of each item during a common base year A common-base year financial statement presents items relative to a certain base, which is the _. What is the impact on the total asset turnover ratio if sales increase significantly while there is no change in any of the other variables? traditional financial ratio categories Asset management ratios The total asset turnover ratio will increase. ![]() base year base amount A useful way of standardizing financial statements is to choose a _ and then express each item relative to the overall growth By combining common-size and base year analysis, we eliminate the effect of the _. sizes Common-size statements are used for comparing firms with differing _. To track changes in a firm's capital structure Which one of the following is one way in which financial managers use a common-size balance sheet? Profitability Return on assets (ROA) is a measure of _.
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