activity ratios
financial relationships that measure how efficiently a firm uses assets to generate sales.
profitability ratios
measures of a firm's sales and earnings performance.
current ratio
current assets divided by current liabilities; measures a firm's ability to pay current debts when they come due.
days accounts receivable collection period
accounts receivable divided by average daily credit sales; indicates the average number of days required to convert accounts receivable into cash.
days inventory on hand
inventory divided by average daily cost of goods sold; measures the efficiency of the firm in managing its inventory.
inventory turnover
cost of goods sold divided by inventory; measures the efficiency of the firm in managing its inventory.
quick ratio
cash plus accounts receivable divided by current liabilities.
sales-to-asset ratio
total sales divided by average total assets.
debt-to-total-assets ratio
total liabilities divided by total assets.
dividend payout ratio
cash dividends divided by net income; measures the fraction of earnings a firm pays out in cash to stockholders and thus is not retained.
profit margin (pm)
a measure of expense control defined as net income divided by total revenue.
free cash flow
typically cash flow from operations less required capital expenditures (those capital expenditures required to maintain the company's ability to produce cash flow from operations).
days accounts payable outstanding
accounts payable divided by average daily purchases; measures the firm's efficiency in using trade credit to finance its working capital needs.
lead bank
in loan participations, this is generally the bank that makes the original loan and sells participations. often, the lead bank retains the largest share of the loan that is participated.
direct loan
a loan with terms negotiated directly between the lender and actual user of the funds.
indirect loan
a loan in which a retailer takes the credit application and negotiates terms with the actual borrower. the lender then purchases the loan from the retailer under prearranged terms.
prepaid cards
a hybrid of the debit card in which customers prepay for services to be rendered and receive a card against which purchases are charged.
reverse mortgage
a mortgage in which the owner of the property can borrow against existing equity in the property.
dealer
a trader who sets bid and ask prices for every security traded.
