M02_MCNA8932_01_SE_C02.

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Financial Statement and Ratio Analysis Chapter 2 Summary

Concepts You Key Terms and Equations Solution Tools Extra Practice
Should Know MyFinanceLab

Sales - Cost of goods sold

Gross profit margin =
Sales
Gross profit
= Eq. 2.3
Sales

Operating profits
Operating profit margin = Eq. 2.4
Sales

Net income after tax

Net profit margin = Eq. 2.5
Sales
Current assets
Current ratio = Eq. 2.6
Current liabilities

Current assets - Inventory

Quick ratio = Eq. 2.7
Current liabilities
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Financial Statement and Ratio Analysis Chapter 2 Summary

Concepts You Key Terms and Equations Solution Tools Extra Practice
Should Know MyFinanceLab

Cost of goods sold

Inventory turnover = Eq. 2.8
Inventory
Accounts receivable
Sales
turnover = Eq. 2.9
Accounts receivable
Sales
Total asset turnover = Eq. 2.10
Total assets
Average collection
Accounts receivable
period =
Daily credit sales
or
Average collection
365 days
period = Eq. 2.11
Receivables turnover
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Financial Statement and Ratio Analysis Chapter 2 Summary

Concepts You Key Terms and Equations Solution Tools Extra Practice
Should Know MyFinanceLab

Total liabilities
Debt ratio = Eq. 2.12
Total assets
Total liabilities
Debt@equity ratio = Eq. 2.13
Common shareholders equity

Times interest earned =

Earnings before interest and taxes (EBIT)
Eq. 2.14
Interest

EPS =
Net income available to common shareholders
Eq. 2.15
Number of shares outstanding

Market price of common shares

PE = Eq. 2.16
Earnings per share