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FMVA (CFI) With 100% ACCURATE QUESTIONS AND ANSWERS GRADED A+
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JACKLINEFMVA (CFI) With 100% ACCURATE QUESTIONS AND ANSWERS GRADED A+
Terms in this set (70)
shows how much is spent on producing the good or service that is sold for every dollar of sales
revenue. (Profitability ratio)
Gross profit margin
Gross Profit Margin = Gross Profit/Sales
ompares the operating income of a company to its net sales. It is an indication of the efficiency of
the operation
Operating Profit Margin
Operating Profit Margin = EBIT/Sales
shows how much is earned for every dollar of sales revenue.
Net profit margin
Net profit margin = Net income / Sales
shows how well management manages tax. (Efficiency ratio)
Tax ratio
Tax ratio = Tax expense / Pre-tax income
shows how much income is available to service debt costs. (Leverage ratio)
Interest Coverage Ratio
Interest coverage ratio = EBIT(DA) / Interest expenses
FMVA (CFI)
1/7
, 9/10/24, 9:46 AM
measures the ability of a company to cover its obligations in the short term. (Liquidity ratio)
Current Ratio
Current ratio = Current assets / Current liabilities
provides a more prudent measure of short-term liquidity recognizing that the inventory cannot
always be readily converted into cash. (Liquidity ratio)
Quick ratio / acid test ratio
Quick ratio = (Current assets – Inventory) / Current liabilities
hows how effective the company is in generating sales from its assets. (Efficiency ratio)
Asset turnover ratio
Asset turnover ratio = Sales / Total (or net) assets
shows how quickly a company sells its inventory. (Efficiency ratio)
Inventory turnover ratio
Inventory turnover ratio = Cost of sales / Inventory
ndicates the average number of days goods remain in inventory before being sold. (Efficiency
ratio)
Inventory days ratio
Inventory days ratio = (Inventory x 365) / Cost of sales
measures how effective the company’s credit policies are. (Efficiency ratio)
Accounts receivable turnover ratio
Accounts receivable turnover ratio = Sales / Accounts receivable
indicates the average number of days a firm takes to collect payments on goods sold. (Efficiency
ratio)
Accounts receivable days ratio
Accounts receivable days ratio = (Accounts receivable x 365) / Sales
measures how effective the company is in paying its suppliers. (Efficiency ratio)
Accounts payable turnover ratio
Accounts payable turnover ratio = Cost of sales / Accounts payable
indicates the average number of days a firm takes to pay for items purchased. (Efficiency ratio)
Accounts payable days ratio
Accounts payable days ratio = (Accounts payable x 365) / Cost of sales
FMVA (CFI)
2/7
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