ACCTNG 2400 1st Edition Lecture 24 Outline of Last Lecture I. Chapter 12II. Statement of cash flowsIII. Relationship between cash flow categories and other financial statementsIV. Direct and indirect reporting V. Evaluating cash flow Outline of Current LectureVI. Chapter 13VII. Ratio analysisa. Profitabilityb. Solvencyc. liquidityVIII. common profitablility ratiosa. net profit marginb. gross profit percentagec. asset turnover ratiod. return on equitye. earnings per sharef. price/earnings ratioThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.IX. common liquidity ratiosa. current ratiob. quick ratioc. inventory turnover ratiod. receivable turnover ratioX. common solvency ratiosa. debt to assetsb. times interest earnedXI. leverage the the debt-to-assets ratioCurrent LectureRatio Analysis – compares the amounts for one or more line items to the amounts for other lineitems in the same year- profitability – company’s ability to generate income - liquidity – company has sufficient current assets to repay liabilities when due- solvency – company’s ability to pay interest and repay debt when dueCommon Profitablility RatiosCommon Liquidity ratiosCommon Solvency Ratios“Leverage” – the debt-to-assets ratioWhy is more debt (higher ratio), higher risk?- Difference for stockholders between good times and bad times is magnified (higher risk),when the comapyn has a higher percentage of debt
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