1. MBU 652
Financial Decision
Making
Performance Measurements
Part 2: Liquidity, Activity, & Debt

2. Categories of a Financial
Statement Analysis
 Profitability
 Liquidity
 Activity
 Debt (Leverage)

3. Liquidity
 Working Capital
 Current Ratio
 Acid-Test Ratio

4. Working Capital
Current Assets
- Current Liabilities
Working Capital

5. Current Ratio
Current Ratio = __Current Assets__
Current Liabilities

6. Acid-Test Ratio
Acid-Test = Cash + Accounts Receivable
Ratio Current Liabilities

7. Activity
 Accounts Receivable Turnover
 Inventory Turnover

8. Accounts Receivable
Turnover (A/R)
A/R Turnover = ____Sales_____
Average A/R

9. Inventory Turnover
Inventory = Cost of Goods Sold (COGS)
Turnover Average Inventory

10. Debt (Leverage)
 Debt Ratio
 Debt/Equity Ratio

11. Debt Ratio
Debt = ______Total Liabilities_______
Ratio Total Liabilities & Owners’ Equity

12. Debt/Equity Ratio
Debt/Equity = __Total Liabilities__
Ratio Total Owners’ Equity