{"id":137,"date":"2023-03-27T16:26:48","date_gmt":"2023-03-27T16:26:48","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/ch-6-key-terms-principles-of-finance-openstax\/"},"modified":"2023-04-02T23:26:28","modified_gmt":"2023-04-02T23:26:28","slug":"ch-6-key-terms-principles-of-finance-openstax","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/ch-6-key-terms-principles-of-finance-openstax\/","title":{"raw":"Glossary of Key Terms","rendered":"Glossary of Key Terms"},"content":{"raw":"
\r\n
\r\n

Chapter 3 Glossary of\u00a0 Key Terms<\/h2>\r\n
\r\n
\"\"accounts receivable turnover ratio<\/span><\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n
\r\n
\r\n
\r\n
\r\n
\r\n \t
measures how many times in a period (usually a year) a company will collect cash from accounts receivable<\/dd>\r\n<\/dl>\r\n
\r\n \t
book value per share<\/dt>\r\n \t
total book value (assets \u2013 liabilities) of a firm expressed on a per-share basis<\/dd>\r\n<\/dl>\r\n
\r\n \t
cash ratio<\/dt>\r\n \t
represents the firm\u2019s cash and cash equivalents divided by current liabilities; often used by investors and lender to asses an organization\u2019s liquidity<\/dd>\r\n<\/dl>\r\n
\r\n \t
current ratio<\/dt>\r\n \t
current assets divided by current liabilities; used to determine a company\u2019s liquidity (ability to meet short-term obligations)<\/dd>\r\n<\/dl>\r\n
\r\n \t
days\u2019 sales in inventory<\/dt>\r\n \t
the number of days it takes a company to turn inventory into sales<\/dd>\r\n<\/dl>\r\n
\r\n \t
debt-to-assets ratio<\/dt>\r\n \t
measures the portion of debt used by a company relative to the amount of assets<\/dd>\r\n<\/dl>\r\n
\r\n \t
debt-to-equity ratio<\/dt>\r\n \t
measures the portion of debt used by a company relative to the amount of stockholders\u2019 equity<\/dd>\r\n<\/dl>\r\n
\r\n \t
DuPont method<\/dt>\r\n \t
framework for financial analysis that breaks return on equity down into smaller elements<\/dd>\r\n<\/dl>\r\n
\r\n \t
earnings per share (EPS)<\/dt>\r\n \t
measures the portion of a corporation\u2019s profit allocated to each outstanding share of common stock<\/dd>\r\n<\/dl>\r\n
\r\n \t
efficiency ratios<\/dt>\r\n \t
ratios that show how well a company uses and manages its assets<\/dd>\r\n<\/dl>\r\n
\r\n \t
inventory turnover<\/dt>\r\n \t
measures the number of times an average quantity of inventory was bought and sold during the period<\/dd>\r\n<\/dl>\r\n
\r\n \t
liquidity<\/dt>\r\n \t
ability to convert assets into cash in order to meet primarily short-term cash needs or emergencies<\/dd>\r\n<\/dl>\r\n
\r\n \t
market value ratios<\/dt>\r\n \t
measures used to assess a firm\u2019s overall market price<\/dd>\r\n<\/dl>\r\n
\r\n \t
operating cycle<\/dt>\r\n \t
amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer<\/dd>\r\n<\/dl>\r\n
\r\n \t
price\/earnings (P\/E) ratio<\/dt>\r\n \t
company\u2019s stock price divided by the company\u2019s earnings per share; indicates the amount investors are willing to pay for one dollar of earnings<\/dd>\r\n<\/dl>\r\n
\r\n \t
profit margin<\/dt>\r\n \t
represents how much of sales revenue has translated into income<\/dd>\r\n<\/dl>\r\n
\r\n \t
quick ratio<\/dt>\r\n \t
also known as the acid test ratio<\/em>; ratio used to determine a firm\u2019s ability to pay short-term debts using its most liquid assets<\/dd>\r\n<\/dl>\r\n
\r\n \t
return on equity<\/dt>\r\n \t
measures the company\u2019s ability to use its invested capital to generate income<\/dd>\r\n<\/dl>\r\n
\r\n \t
return on total assets<\/dt>\r\n \t
measures the company\u2019s ability to use its assets successfully to generate a profit<\/dd>\r\n<\/dl>\r\n
\r\n \t
solvency<\/dt>\r\n \t
implies that a company can meet its long-term obligations and will likely stay in business in the future<\/dd>\r\n<\/dl>\r\n
\r\n \t
times interest earned (TIE) ratio<\/dt>\r\n \t
measures the company\u2019s ability to pay interest expense on long-term debt incurred<\/dd>\r\n<\/dl>\r\n
\r\n \t
total asset turnover<\/dt>\r\n \t
measures the ability of a company to use its assets to generate revenues<\/dd>\r\n<\/dl>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\nAttribution:<\/strong>\r\n\r\nThis chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.\r\n\r\nhttps:\/\/openstax.org\/books\/principles-finance\/pages\/1-key-terms<\/a>\r\n\r\nAccess for free at https:\/\/openstax.org\/books\/principles-finance\/pages\/6-key-terms<\/a>","rendered":"
\n
\n

Chapter 3 Glossary of\u00a0 Key Terms<\/h2>\n
\n
\"\"accounts receivable turnover ratio<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n
\n
\n
\n
\n
\n
\n
\n
measures how many times in a period (usually a year) a company will collect cash from accounts receivable<\/dd>\n<\/dl>\n
\n
book value per share<\/dt>\n
total book value (assets \u2013 liabilities) of a firm expressed on a per-share basis<\/dd>\n<\/dl>\n
\n
cash ratio<\/dt>\n
represents the firm\u2019s cash and cash equivalents divided by current liabilities; often used by investors and lender to asses an organization\u2019s liquidity<\/dd>\n<\/dl>\n
\n
current ratio<\/dt>\n
current assets divided by current liabilities; used to determine a company\u2019s liquidity (ability to meet short-term obligations)<\/dd>\n<\/dl>\n
\n
days\u2019 sales in inventory<\/dt>\n
the number of days it takes a company to turn inventory into sales<\/dd>\n<\/dl>\n
\n
debt-to-assets ratio<\/dt>\n
measures the portion of debt used by a company relative to the amount of assets<\/dd>\n<\/dl>\n
\n
debt-to-equity ratio<\/dt>\n
measures the portion of debt used by a company relative to the amount of stockholders\u2019 equity<\/dd>\n<\/dl>\n
\n
DuPont method<\/dt>\n
framework for financial analysis that breaks return on equity down into smaller elements<\/dd>\n<\/dl>\n
\n
earnings per share (EPS)<\/dt>\n
measures the portion of a corporation\u2019s profit allocated to each outstanding share of common stock<\/dd>\n<\/dl>\n
\n
efficiency ratios<\/dt>\n
ratios that show how well a company uses and manages its assets<\/dd>\n<\/dl>\n
\n
inventory turnover<\/dt>\n
measures the number of times an average quantity of inventory was bought and sold during the period<\/dd>\n<\/dl>\n
\n
liquidity<\/dt>\n
ability to convert assets into cash in order to meet primarily short-term cash needs or emergencies<\/dd>\n<\/dl>\n
\n
market value ratios<\/dt>\n
measures used to assess a firm\u2019s overall market price<\/dd>\n<\/dl>\n
\n
operating cycle<\/dt>\n
amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer<\/dd>\n<\/dl>\n
\n
price\/earnings (P\/E) ratio<\/dt>\n
company\u2019s stock price divided by the company\u2019s earnings per share; indicates the amount investors are willing to pay for one dollar of earnings<\/dd>\n<\/dl>\n
\n
profit margin<\/dt>\n
represents how much of sales revenue has translated into income<\/dd>\n<\/dl>\n
\n
quick ratio<\/dt>\n
also known as the acid test ratio<\/em>; ratio used to determine a firm\u2019s ability to pay short-term debts using its most liquid assets<\/dd>\n<\/dl>\n
\n
return on equity<\/dt>\n
measures the company\u2019s ability to use its invested capital to generate income<\/dd>\n<\/dl>\n
\n
return on total assets<\/dt>\n
measures the company\u2019s ability to use its assets successfully to generate a profit<\/dd>\n<\/dl>\n
\n
solvency<\/dt>\n
implies that a company can meet its long-term obligations and will likely stay in business in the future<\/dd>\n<\/dl>\n
\n
times interest earned (TIE) ratio<\/dt>\n
measures the company\u2019s ability to pay interest expense on long-term debt incurred<\/dd>\n<\/dl>\n
\n
total asset turnover<\/dt>\n
measures the ability of a company to use its assets to generate revenues<\/dd>\n<\/dl>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

 <\/p>\n

Attribution:<\/strong><\/p>\n

This chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.<\/p>\n

https:\/\/openstax.org\/books\/principles-finance\/pages\/1-key-terms<\/a><\/p>\n

Access for free at https:\/\/openstax.org\/books\/principles-finance\/pages\/6-key-terms<\/a><\/p>\n","protected":false},"author":101,"menu_order":14,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-137","chapter","type-chapter","status-publish","hentry"],"part":24,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/users\/101"}],"version-history":[{"count":8,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/137\/revisions"}],"predecessor-version":[{"id":1271,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/137\/revisions\/1271"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/parts\/24"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/137\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/media?parent=137"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapter-type?post=137"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/contributor?post=137"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/license?post=137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}