D076 – Ratios unit test passed
AR Turnover - ✔✔Is an activity/asset management ratio. Helps to identify how quickly these accounts
receivables turn over during a given year. A rate of 12 indicated that the company is collecting once a
month. If less or decreasing then it may indicate that the company is taking longer to collect.
Credit Sales/Accounts Receivable
Average Collection Period (ACP) - ✔✔Is an activity ratio. Convert AR turnover into a day count measure.
365/AR Turnover
Current Ratio - ✔✔Is a liquidity ratio. Short-term debt paying ability.
Current Assets/Current Liabilities
Debt Ratio - ✔✔Is a leverage ratio. Measures the proportion of the firm's assets financed with debt.
Total Liabilities/Total Assets
Debt-to-Equity Ratio - ✔✔Is a leverage ratio. Indicates how many dollars of debt the firm has for every
dollar of equity.
Total Liabilities/Total Owners' Equity
Fixed Asset Turnover (FAT) - ✔✔Is an activity ratio. Is similar to TAT, but indicates how many dollars in
sales the company generates per dollar of fixed assets (property, plant, equipment).
AR Turnover - ✔✔Is an activity/asset management ratio. Helps to identify how quickly these accounts
receivables turn over during a given year. A rate of 12 indicated that the company is collecting once a
month. If less or decreasing then it may indicate that the company is taking longer to collect.
Credit Sales/Accounts Receivable
Average Collection Period (ACP) - ✔✔Is an activity ratio. Convert AR turnover into a day count measure.
365/AR Turnover
Current Ratio - ✔✔Is a liquidity ratio. Short-term debt paying ability.
Current Assets/Current Liabilities
Debt Ratio - ✔✔Is a leverage ratio. Measures the proportion of the firm's assets financed with debt.
Total Liabilities/Total Assets
Debt-to-Equity Ratio - ✔✔Is a leverage ratio. Indicates how many dollars of debt the firm has for every
dollar of equity.
Total Liabilities/Total Owners' Equity
Fixed Asset Turnover (FAT) - ✔✔Is an activity ratio. Is similar to TAT, but indicates how many dollars in
sales the company generates per dollar of fixed assets (property, plant, equipment).
