Managerial Finance

Liquidity Ratio that measures a companies ability to satisfy it's short term obligations as they come due.

• Current Assets     
• Current Liabilities

Liquidity ratio that is similar to the current ratio but this takes into consideration the inventory

• Current Assets - Inventory 
• Current Liabilities

Provides a measure of how quickly a firm sells its goods  

• COGS    
• Inventory

Useful in evaluating the credit policies of a firm.

• Accounts Receivable
• Average Daily Sales

Measures the length of time that it takes a firm to pay its suppliers  

• Accounts Payable      
• Average Daily Purchases

Measures the efficiency with which a firm uses its fixed assets 

• Sales                
• Net Fixed Assets

Indicates the efficiency with which a firm uses all its assets to generate sales 

• Sales          
• Total Assets

Measures the proportion of total assets financed by creditors

• Total Liabilities
• Total Assets

Also called the Equity Multiplier 

• Total Assets        
• Common Stock Equity

• Long Term Debt     
• Stockholders Equity

Measures the firms ability to make contractual interst payments 

• EBIT                 
• Interest Expense

Measures percentage of each sales dollar remaining after a firm has paid for its goods

• Gross Profit 
• Sales

Measures the percentage of each sales dollar remaining after deducting all costs and expenses other than interest and taxes

• Operating Profit 
• Sales

Investing public considers this ratio to be an indicator of success

Represents nuumber of dollars earned on behalf of each outstanding share

• Earnings Avail. for Common Stockholders 
• # of Shares of Common Stock

Often called the ROI (Return on Investment)

It measures a firms overall effectiveness in using assets to generate returns to common stockholders

• Earnings Avail. for Common Stockholders 
• Total Assets

Measure of profitability that captures the return earned on the common stockholders investment

• Earnings Avail. for Common Stockholders 
• Common Stock Equity

Measures the amount investors are willing to pay for each dollar of the firms earnings

• Market Price Per Share of Common Stock 
• Earnings Per Share

Book Value

•               Common Stock Equity              
• # Shares of Common Stock Outstanding

Market Value

• Market Value Per Share Of Comm. Stock 
• Book Value Per Share of Comm. Stock

Balance Sheet

Income Statement

Statement of Retained Earnings

Statement of Cash Flows

Operating Flows

Investment Flows

Financing Flows

• Free Cash Flows is the amount of cash available to investors

Sole Proprietorship

Corporation

Partnership

LLC

Capital Budgeting

Risk Management

Corporate Governance

Financial Management

Financing Function

Time Value of Money

Trade off Between Risk and Return

Diversification

Efficient Markets

No Arbitrage

Measures firms Overall Liquidity

Current Assets - Current Liabilities

A snapshot of a companies financial position at a given time

• 3 Sections
• Assets

Liabilities

Shareholder Equity