Is this Math Class?
This is used to describe the analysis of a single year of financial data
Vertical Analysis
Keeping too much cash on hand means that a business is not maximizing the value of its assets. For this reason, most managers spend considerable time assessing their cash needs
Cash Management
These are usually constructed periodically for each investment, profit, and cost center
Performance Reports
Average Collection Period
365/accounts receivable turnover
Quick Ratio
(Cash and cash equivalents + Short-term investments + Accounts receivable)/Current liabilities
To observe percentage changes over time in selected financial data, investment professionals often calculate
Trend Percentages
The time in years that it takes net future after tax cash inflows to equal the original investment
Cash Payback Period
This seeks to provide a "balanced view" of company performance by evaluating a company's subunits based on both financial and non-financial measures
Balanced Scorecard
1) Working Capital
2) Days' Sales in Inventory
1) Current Assets - Current Liabilities
2) 365/inventory turnover
Return on Assets
Net income/average total assets
This is a technique that can be useful for detecting an improvement or deterioration in a firm's performance and for spotting trends regarding a firm's financial well-being
Horizontal Analysis
This is often used by investment professionals and investors to evaluate a company's cash-flow strength
Free Cash Flow
This is used to compare the efficiency with which the divisions are song their operating assets to generate sales
Asset Turnover
1) Inventory Turnover
2) Earnings per share
1) Cost of goods sold/average inventory
2) Net income - preferred dividends/weighted average common shares outstanding
1) Return on Sales
2) Gross Profit Percentage
1) Net Income/Sales
2) Gross profit/net sales
The overall cost of capital for a given project should reflect the cost rates of the several sources of funds in proportion to the amounts obtained from each source
Weighted Average Cost of Capital (WACC)
These are short-term, highly liquid investments that are:
1) early convertible into cash
2) close enough to maturity so that their market value is relatively insensitive to interest rate changes
Cash Equivalents
The cost of capital represents a minimum required rate of return
Hurdle Rate
1) Dividend payout ratio
2) Dividend Yield
1) Annual dividend per share/earnings per share
2) Annual dividend per share/market price per share
1) Accounts Receivable Turnover
2) Return on common stockholder's equity
1) Net Sales/Average Accounts Receivable
2) (Net income - preferred dividends)/average common stockholders' equity
The attractiveness of a particular investment is determined in large part by the quantitative relationship between the cash investment in stage I and the net cash receipts expected in stages II and III, in its simplest form
This is a form of capital expenditure analysis that evaluates investment proposals in terms of the cash payback period
Cash Payback Method
A financial plan in the form of a cost formula or a multiple-column presentation that makes cost projections for various activity levels within a relevant range
Flexible Budget
1) Operating cash flow to capital expenditures ratio
2) Times-interest-earned ratio
3) Operating-cash-flow-to-current-liabilties ratio
1) Cash flow from operating activities/annual net capital expenditures
2) Income before interest expense and income taxes/interest expense
3) Cash flow from operating actives/average current liabilities
1) Asset Turnover
2) Debt to Equity Ratio
3) Price Earning Ratio
1) net sales/average total assets
2) total liabilities/total stockholders equity
3) market price per share/earnings per share