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Unformatted text preview: Preliminary Midterm 1 Formula Sheet Definition of Variables: A = Assets = Total Assets Current Assets = CA Current Liabilities = CL E = Equity = Total Equity D = Debt = Total Debt = L = Liabilities = Total Liabilities LTD = Long-Term Debt NI = Net Income b = Plowback ratio Current Ratio = CA/CL, do you have enough assets to cover your liabilities? Measure of short-term liquidity. Quick Ratio = (CA – Inventory)/CL, Inventory is the least liquidity (goes cash, AR, inventory)-inventory is hard to get rid of. ROE = NI/E ROA = NI/A Debt-Equity ratio = D/E (or L/E), How much we have in debt to every dollar in equity. Equity Multiplier = A/E = 1 + D/E, How much assets we have to every dollar in equity. Asset Turnover = AT = Sales/A, for every $ in assets, we generate this much in sales. How much assets are contributing to sales. Profit Margin = PM = NI/Sales New Working Capital = NWC = CA – CL Cash Ratio = Cash/CL, a short term creditor would be interested in this because shows how much cash you have to...
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- Fall '08
- Generally Accepted Accounting Principles, Assets Current assets