MBU 652
Financial Decision
Making
Performance Measurements
Part 2: Liquidity, Activity, & Debt
Categories of a Financial
Statement Analysis
 Profitability
 Liquidity
 Activity
 Debt (Leverage)
Liquidity
 Working Capital
 Current Ratio
 Acid-Test Ratio
Working Capital
Current Assets
- Current Liabilities
Working Capital
Current Ratio
Current Ratio = __Current Assets__
Current Liabilities
Acid-Test Ratio
Acid-Test = Cash + Accounts Receivable
Ratio Current Liabilities
Activity
 Accounts Receivable Turnover
 Inventory Turnover
Accounts Receivable
Turnover (A/R)
A/R Turnover = ____Sales_____
Average A/R
Inventory Turnover
Inventory = Cost of Goods Sold (COGS)
Turnover Average Inventory
Debt (Leverage)
 Debt Ratio
 Debt/Equity Ratio
Debt Ratio
Debt = ______Total Liabilities_______
Ratio Total Liabilities & Owners’ Equity
Debt/Equity Ratio
Debt/Equity = __Total Liabilities__
Ratio Total Owners’ Equity
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MBU652 Financial Statement Analysis - Part 2

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MBU652 Financial Statement Analysis - Part 2

  1. 1. MBU 652 Financial Decision Making Performance Measurements Part 2: Liquidity, Activity, & Debt
  2. 2. Categories of a Financial Statement Analysis  Profitability  Liquidity  Activity  Debt (Leverage)
  3. 3. Liquidity  Working Capital  Current Ratio  Acid-Test Ratio
  4. 4. Working Capital Current Assets - Current Liabilities Working Capital
  5. 5. Current Ratio Current Ratio = __Current Assets__ Current Liabilities
  6. 6. Acid-Test Ratio Acid-Test = Cash + Accounts Receivable Ratio Current Liabilities
  7. 7. Activity  Accounts Receivable Turnover  Inventory Turnover
  8. 8. Accounts Receivable Turnover (A/R) A/R Turnover = ____Sales_____ Average A/R
  9. 9. Inventory Turnover Inventory = Cost of Goods Sold (COGS) Turnover Average Inventory
  10. 10. Debt (Leverage)  Debt Ratio  Debt/Equity Ratio
  11. 11. Debt Ratio Debt = ______Total Liabilities_______ Ratio Total Liabilities & Owners’ Equity
  12. 12. Debt/Equity Ratio Debt/Equity = __Total Liabilities__ Ratio Total Owners’ Equity

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