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MBA 560: Financial Statement Analysis: Key terms

MBA 560 Financial Statement Analysis

Some Key terms

Current Ratio

Expresses the relationship between a company's most liquid assets and its liabilities that require repayment soon.

Return on Equity (ROE)

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets. (source: Investopedia -- https://www.investopedia.com/terms/r/returnonequity.asp)

Debt-To-Equity Ratio

A company’s dependence on debt as a source of capital can be measured by comparing the amount of debt on its balance sheet to the level of equity it has (known as the debt-to -equity ratio). (Source: S&P Global); total liabilities. This is not a measure of short-term liquidity. It is a measure of creditor long-term risk. The lower the debt ration, the safer their position.  HOWEVER, this should also be compared to the Industry as a whole.

 

EBITDA

The aggregate earnings before interest, taxes, depreciation, and amortization.


Debt Service Coverage Capacity

In corporate finance, the Debt-Service Coverage Ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year, including interest, principal, sinking-fund and lease payments. (Source: Investopedia - https://www.investopedia.com/terms/d/dscr.asp)

SWOT

Strengths, Weaknesses, Opportunities, Threats - a report that can be found in EBSCO Business Source Complete and Gale Business Source Essentials

 

Resources