Financial Terms and Ratios by Letter
Financial Statement Terms
- Common Stock Value Definition and Explanation The total value of all the common stock issued by a company.
- Stock Dividends Definition and Explanation Cash from company earnings paid directly to shareholders.
- Retained Earnings Definition and Explanation Profit a company has left over after all expenses are paid and shareholders receive their portion, and reserved for future use.
- Preferred Stock Value Definition and Explanation The value of the total preferred stock issued by a company.
- Earnings Before Income Taxes Definition and Explanation Company profit recorded before income taxes are subtracted.
- Income Tax Definition and Explanation The amount of total taxes the company owes from income generated.
- Unamortized Goodwill Definition and Explanation The total estimated value of intangible company assets.
- Sales General and Administration Definition Company expenses resulting to the sale of goods and services, along with management expenses.
- Depreciation and Amortization Definition and Explanation Considered an expense, a cost that is spread out among company reporting periods from the purchase of a large asset.
- Capital Expenditures Definition and Explanation Typically large expense items a company purchases that it will benefit from for more than a year.
- Avg Annual Current Maturities Definition and Explanation The amount the company has paid on long term debt principal for the year.
- Cash Flow from Operations Definition and Explanation The cash generated by the company from the sales of products and services.
- Tax Rate Definition and Explanation The percentage of taxable company income.
- Cash Dividends Per Share Definition and Explanation The amount paid out per single share of ownership in a company.
- Interest Expense Definition and Explanation Commonly used to record costs or income generated from sources other than a company’s operations.
- Total Stockholders Equity Definition and Explanation The value of equity, or capital, all company shareholders own.
- Market Price of Common Stock Definition and Explanation The company stock price during the period reported.
- Net Earnings Definition and Explanation The company profit remaining after all expenses are subtracted.
- Average Shares Outstanding Definition The count of the shares of ownership issued by a company.
- Total Liabilities Definition and Explanation A summation of all company obligations, both short and long term.
- Net Sales Definition and Explanation Total company sales minus sales returns, refunds, or allowances.
- Cost of Goods Sold Definition and Explanation The cost of creating and offering for sale the goods or services a company provides.
- Operating Expenses Definition and Explanation A summation of various expenses incurred during company operations.
- Lease Payments Definition and Explanation Contain the leased property of a company, totaling the sum of all lease payments.
- Long Term Debt Definition and Explanation The amount the company has paid on long term debt principal for the year.
- Short Term Debt Definition and Explanation Company debt due within one year.
- Total Current Assets Definition and Explanation Assets that are used during company daily operating activities.
- Total Current Liabilities Definition and Explanation Company financial obligations it must fulfill within one year.
- Accounts Payable Definition and Explanation Represents the bills a company owes to its suppliers.
- Total Assets Definition and Explanation A summation of all the assets a company owns.
- Accounts Receivable Definition and Explanation The money owed to a company by its customers who have purchased products or services.
- Net Property Plant Equipment Definition and Explanation A company’s fixed assets, such as buildings, machines, and equipment.
- Inventories Definition and Explanation The value of products in storage a company intends to sell, or are to be used in the production of products to sell.
- Marketable Securities Definition and Explanation Company investments that can easily be converted into cash.
- Cash and Cash Equivalents Definition and Explanation Cash, or financial assets easily converted to cash, that a company possesses.
Financial Ratios
- Average Collection Period Example An Average Collection Period example analysis and benchmark, going through the steps needed to determine and measure the average collection period and discussing the results.
- Interest Coverage Ratio Definition and Explanation Measures how well a company can make payments on its debt.
- Expense Coverage Days Definition and Explanation An estimation of the number of day a company can cover its operations with its most liquid assets
- Break Even Point Definition and Explanation The minimum sales required for a company to meet its expenses
- Stockholders Equity Definition and Explanation Measures how a company has structured itself to conduct operations over the long term
- Current Assets to Total Debt Definition and Explanation Used as a liquidity measurement, showing how well a company can pay all its debt with all its assets
- Cash Flow to Total Debt Definition and Explanation Estimates how quickly a company can pay off all its debt with only its cash flow
- Equity to Total Debt Definition and Explanation Calculates the ability of a company to meet all of its debt obligations
- Earnings to Total Assets Definition and Explanation Measures the productive ability of all a company’s assets
- Retained Earnings to Total Assets Definition Measures how successful a company is at accumulating assets through retained earnings
- Working Capital to Total Assets Definition and Explanation Measures company ability to pay its short term financial obligations
- Working Capital Turnover Definition and Explanation Shows how well a company can generate sales from its working capital
- Basic Defense Interval Definition and Explanation Measures the number of days a company can continue operating before it runs out of cash
- Depreciation to Cash Flow Definition and Explanation An efficiency measurement gauging the impact of depreciation and amortization on cash flow
- Management Rate of Return Definition and Explanation Determines a company’s ability to profitably use is assets
- Cash Flow to Capital Expenditures Definition Measures a company’s efforts to invest in itself by acquiring long term purchases
- Gross Profit to Net Sales Definition and Explanation Gauges how much profit a company is extracting out of every dollar of sales
- Capitalization Rate Definition and Explanation Measures the rate of return of company stock
- Sales to Stock Price Definition and Explanation Estimates how company sales affects its stock price
- Stockholders Equity Growth Rate Definition Measures the level of additional equity added to existing company equity
- Dividend Payout Ratio Definition and Explanation The Dividend Payout Ratio measures the percentage of Stock Dividends per share to the Earnings Per Share, showing how the company is paying for its dividend payout
- Net Worth per Share Definition and Explanation Measures the value of the company per share if its assets were liquidated
- Preferred Stock to Stockholders Equity Definition Measures the percentage of preferred stock to all stock issued by a company, exposing the level of risk to common stockholders
- Retained Earnings to Stockholders Equity Definition Calculates how aggressively a company is retaining earnings compared to total stockholders equity
- Capital Ratio Definition and Explanation Measures the equity and debt required to attain its long term assets
- Altmans Z Score Definition and Explanation A method to estimate a bankruptcy prediction for a company
- Debt Ratio Definition and Explanation Measures the ability of a company to manage its short and long term debt
- Working Capital to Debt Definition and Explanation Measures a company’s ability to reduce its debt
- Current to Total Liabilities Definition and Explanation Reviews the debt structure of a company
- Sales to Current Assets Definition and Explanation Measures a company’s ability to utilize its assets to generate sales
- Inventory to Working Capital Definition and Explanation Measures the affect of a company’s inventory level on its ability to operate profitably
- Inventory to Sales Definition and Explanation Determines the ability of a company to manage their inventory levels
- Price to Cash Flow Definition and Explanation A valuation ratio intended to estimate a company’s value
- Cash Ratio Definition and Explanation Measures how completely a company can pay its liabilities
- Cash to Working Capital Definition and Explanation Calculates a company’s ability to pay its short term debt using its most liquid assets, such as cash and securities
- Cash to Current Assets Definition and Explanation Determines how liquid a company is by comparing its readily available cash to its current assets
- Operating Profit Percentage Definition and Explanation etermines the level of profitability of a company’s operations
- Pretax Margin Definition and Explanation Determines the level of profitability given its present sales before taxes are considered
- Tax Rate Percentage Definition and Explanation Measures how well a company can keep its tax expenses under control
- Goodwill to Assets Definition and Explanation Determines how much goodwill the company is recording in relation to its assets
- Interest Expense to Total Debt Definition and Explanation Estimates the interest rate a company is paying on its debt
- Depreciation to Fixed Assets Definition and Explanation Measures how well a company replaces its long term, or fixed assets
- Sales to Equity Definition and Explanation Measures how well a company uses equity from its stockholders to generate sales
- Sales to Administrative Expenses Definition Measures how well a company is managing its administrative expenses as compared to its sales
- Sales to Working Capital Definition and Explanation Estimates the ability of a company to use its cash to generate sales
- Dividend Yield Definition and Explanation Determines how much value one share of company stock will return
- Return on Equity Definition and Explanation Measures how efficient equity from stockholders have generated company earnings
- Return on Total Assets Definition and Explanation Quantifies a company’s ability to utilize acquired assets
- Cash Flow Margin Definition and Explanation The Cash Flow Margin measures how well company operations are at creating cash from sales of their products and services
- Total Asset Turnover Definition and Explanation Gauges a company’s ability in generating sales revenue from all of its investments made in the company
- Fixed Asset Turnover Definition and Explanation Measures a company’s effectiveness in generating sales revenue from investments made in the company
- Accounts Receivable Turnover Definition and Explanation Measuring a company’s ability to collect sales on credit from its customers by estimating the number of times Accounts Receivable were collected from customers during a length of time or period
- Financial Leverage Index Definition and Explanation Calculates how well a company is utilizing its debt
- Cash Flow Adequacy Definition and Explanation Calculates how well a company can cover yearly long term debt payments with its cash flow
- Times Interest Earned Definition and Explanation Examines a company’s ability to pay the interest on its debt
- Long Term Debt To Total Capitalization Definition Estimates investor risk by determining how much a company’s total capitalization is coming from its long term debt
- Debt to Equity Ratio Definition and Explanation Relates the amount of company debt to owners equity, a basic measure of financial risk to stockholders
- Debt to Asset Ratio Definition and Explanation Measures debt in relation to assets in an attempt to gauge the amount of risk
- Inventory Turnover Definition and Explanation Determines the ability of a company to sell its inventory by estimating the number of times its inventory was sold
- Average Collection Period Definition and Explanation The average number of days a company collects revenue from credit sales
- Cash Flow Liquidity Ratio Definition and Explanation Determines how successful a company can manage its short term debt
- Cash Return on Assets Definition and Explanation Shows how well a company can create cash from its investment in assets
- Earnings per Share Definition and Explanation Measures company earnings created for each share of stock
- Price to Earnings Ratio Definition and Explanation Provides a quick way to value a company, measuring how expensive the stock may be
- Gross Profit Margin Definition and Explanation Gauges how much profit a company is extracting out of every dollar of sales
- Operating Profit Margin Definition and Explanation Measures the efficiency of the regular company operations
- Net Profit Margin Definition and Explanation Determines how much profit is left over after each dollar of sales
- Gross Profit Definition and Explanation Gauges how much profit a company is extracting out of every dollar of sales
- Operating Profit Definition and Explanation Measures the efficiency of the regular company operations
- Fixed Charge Coverage Definition and Explanation Determines the ability of a company to pay debt interest and lease payments using profits from operations
- Quick Ratio Definition and Explanation Measures a company’s ability to meet its debt obligations