Term
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Definition
| using financial ratios to evaluate the health of a company for better investing decisions. |
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Term
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Definition
| To compare companies in the same industry but of different sizes and management structures. To quantify how efficient a company is with their resources and to determine their profitability. |
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Term
| What are the 4 categories of financial ratios? |
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Definition
Profitability
Efficiency
Leverage
Liquidity |
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Term
| How many profitability ratios are there? |
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Definition
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Term
| What two types of profitability ratios are there? |
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Definition
| Return type and Margin Type |
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Term
| What do profitability ratios show? |
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Definition
how well a company
utilizes its assets to produce profit and value to shareholders |
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Term
| What are the names of the three profitability return ratios? |
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Definition
Return on Equity
Return on Assets
Return on Capital Employed |
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Term
| What are the three profitability margin ratios? |
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Definition
Gross Margin
Operating Profit Margin
Net Profit Margin |
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Term
| What is the formula for Return on Equity? |
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Definition
| Net Income / Shareholders Equity |
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Term
| What are the components of shareholders' equity? |
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Definition
Outstanding shares
APIC
Retained Earnings
Treasury Stock |
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Term
| What is the Return on Assets formula? |
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Definition
| Net Income / Total Assets |
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Term
| What is the formula for return on capital employed? |
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Definition
| earnings before interest and taxes EBIT / (total assets - current liabilities) |
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