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About this document
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- 4 pages
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- $4 one-time, yours to keep
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- Format
- Subject
- Corporate Finance, Finance
This document covers financial ratios and cash flow analysis. It discusses liquidity ratios, turnover ratios, solvency ratios, profitability ratios, and market ratios. It is useful for understanding a company’s financial health and performance.
What's inside
- Free cash flow calculation
- Liquidity ratios analysis
- Turnover ratios analysis
- Solvency ratios analysis
- Profitability ratios analysis
- Market ratios analysis
Who it is for: For students studying corporate finance. (Postgraduate)
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Summary
Financial ratios and cash flow analysis are tools for assessing a company's financial health. Students learn how to calculate and interpret these metrics.
Free Cash Flow
Free cash flow is calculated using earnings before interest and taxes, depreciation, changes in working capital, and capital expenditure. The effect of doubling depreciation is considered.
Liquidity Ratios
Current and quick ratios help assess a company's ability to meet short-term obligations. The company's ratios suggest potential liquidity issues in the future.
Turnover Ratios
Turnover ratios measure how efficiently a company uses its assets to generate sales. The company's ratios indicate inefficiencies in inventory management and asset utilization.
Solvency, Profitability and Market Ratios
Solvency ratios assess a company's ability to meet long-term debts. Profitability ratios indicate whether a company is generating profit. Market ratios show a company's value as seen by investors.
Key terms
- Current ratio
- The ratio of current assets to current liabilities.
- Quick ratio
- The ratio of liquid assets to current liabilities.
- Inventory turnover
- How often inventory is sold and replaced over a period.
- Debt ratio
- The proportion of a company's assets financed by debt.
- Profit margin
- The percentage of revenue that is profit.
- DuPont analysis
- A method to break down return on equity into three parts.
Questions this document helps with
- How do you calculate free cash flow?
- What do liquidity ratios tell you?
- How do turnover ratios indicate efficiency?
Summary written with AI from the document's text.
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