Managerial Accounting
Class Notes and Lecture Outline
Ratio Analysis 
Leverage
  • leverage is the use of debt rather than investment to increase capital of a business operation
Operating Income versus Net Income
  • operating income is the income earned BEFORE income taxes
  • net income is the income left AFTER taxes have been paid
Liquidity Ratios
  • measure the ability of the firm to meet short-term obligations
    1. current ratio
    2. quick (acid test) ratio
    3. credit card receivables as a percentage of credit card revenues
    4. credit card receivables turnover ratio
    5. average credit card collection period
    6. accounts receivable as a percentage of A/R revenue
    7. accounts receivable turnover
    8. accounts receivable average collection period
Long-Term Solvency Ratios
  • also called net worth ratios
    • net worth  =  total tangible assets  -  total liabilities
  • show the balance between debt or equity financing
    1. total assets to total liabilities ratio
    2. total liabilities to total assets ratio
    3. total liabilities to total equity ratio
    4. cash flow from operating activities to total liabilities ratio
    5. number of times interest earned
    6. cash flow from operating activities to interest
Profitability Ratios
  • measure the effectiveness of management's use of resources available
  • owners, creditors, and management prefer to see these ratios high and growing rather than low and stable
    1. return on assets ratio
    2. net return on assets
    3. net income to revenue ratio
    4. cash flow from operating activities margin ratio
    5. return on stockholders' equity
    6. earnings per share
    7. price earnings ratio
Turnover Ratios
  1. inventory turnover ratio
  2. working capital turnover ratio
  3. fixed asset turnover ratio
  4. total assets turnover ratio
Operating Ratios
  • Food and Beverage Operation
    1. food cost percentage
    2. beverage cost percentage
    3. labor cost percentage
    4. seat turnover by period
    5. sales revenue per available seat
  • Lodging Operation
    1. average rate per occupied room
    2. occupancy percentage
    3. double occupancy percentage
    4. revenue per available room
    5. number of rooms cleaned
    6. labor cost percentage

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this page is maintained by Reed Fisher
last updated August 23, 2009