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Tables of Contents for The Vest-Pocket Guide to Business Ratios
Chapter/Section Title
Page #
Page Count
Is the Company Making Money? Analyzing the Income Statement
1
37
Where are your Sales Dollars Going?
Vertical Analysis
3
1
What is vertical analysis of the income statement?
3
1
Sales (The Top Line)
4
7
How may sales be related to fixed assets ( a balance sheet entry)?
4
1
What is the meaning of the sales-to-fixed assets ratio?
4
1
What is stockholders' equity?
5
1
What is the investors'-capital-to-sales ratio?
6
1
What does the ratio of investors' capital to sales reflect?
6
1
What is the cash turnover ratio?
7
1
What does the cash turnover reflect?
7
1
How is the total asset turnover computed?
8
1
Of what use is the total asset turnover?
9
1
What is the operating leverage ratio?
9
1
Why is the operating leverage factor important?
10
1
Does the operating leverage factor change?
11
1
Gross Profit
11
2
What is gross profit?
11
1
Can gross profit be expressed as a ratio of sales?
12
1
How does the gross-profit-to-sales ratio benefit management?
12
1
Income from Operations (Operating Income)
13
1
What is income from operations?
13
1
Can income from operations be expressed as a ratio of sales?
13
1
How does the income-from-operation-to-sales ratio benefit management?
14
1
Pretax Profit (Pretax Income, Pretax Earnings)
15
2
What is pretax profit?
15
1
How is the ratio of pretax profit to sales computed?
16
1
Net Income (The Bottom Line)
17
5
What is net income?
17
1
Why are net income ratios important?
17
1
How do you calculate the ratio of net income to sales?
17
1
Of what use is the net-income-to-sales ratio?
18
1
What is equity?
18
1
What is the ratio of net income to equity?
19
1
Are preferred stock dividends included when calculating the ratio of net income to capital?
19
1
What does the ratio of net income to equity tell management?
20
1
What is meant by earnings per common share?
20
1
Do preferred stock dividends affect earnings per common share?
21
1
Who is interested in earnings per share?
22
1
Can earnings per share be computed for preferred stock?
22
1
How Much is the Product Costing the Company? Cost of Sales (Direct Expenses)
22
3
What is the cost of sales?
22
1
How is the cost of sales compared to sales?
22
1
How is this ratio used?
23
1
How is this ratio used to evaluate actual data?
23
1
How would the cost-of-sales-to-sales ratio assist planners in making projections?
23
1
Can types of costs of sales be evaluated like the overall cost of sales?
24
1
Selling, General, and Administrative (G&A) Expenses
25
5
What are selling, general, and administrative (G&A) expenses?
25
1
Can selling/G&A expenses be compared to gross profit?
26
1
Does this ratio benefit management?
26
1
Can selling/G&A expenses be related to total sales?
26
1
Does this ratio benefit management?
27
1
Can selling/G&A expenses be compared to net income?
27
1
Does this ratio benefit management?
28
1
Can selling/G&A expenses be compared individually to total sales, gross profit, or net income?
28
2
How is the Company Managing Its Cash Flow?
30
8
What is cash flow?
30
1
Which items are considered cash receipts? What are cash disbursements?
31
1
How are cash flow ratios calculated?
31
1
What is a cash flow statement?
32
1
What do cash flow ratios do for management?
33
1
How are cash flow ratios analyzed for reasonableness?
33
1
Are there other ways to analyze a company's cash position?
34
1
What is the ratio of cash receipt to billed sales and progress payments?
34
1
How do you compute the ratio between the ending accounts receivable balance and the sum of billed sales and progress payments?
35
1
How do you compute the ratio between the ending accounts receivable balance and the sum of billed sales, progress payments, and beginning balance?
36
1
What is the ratio of the ending receivable balance to cash receipts?
37
1
The Organization's Financial Status: Analyzing the Balance Sheet
38
63
Familiarizing with the Balance Sheet
40
6
What is the balance sheet?
40
1
What is vertical analysis?
41
1
Can vertical analysis?
41
2
Can vertical analysis be applied to the balance sheet as a whole?
43
1
Of what benefit is vertical analysis?
44
2
Assets
46
1
Fixed Assets
46
4
Can fixed assets be compared to total assets?
46
1
How does the fixed-to-total-assets ratio serve management?
47
1
Can fixed assets be compared to stockholders' equity?
47
1
What does the fixed-asset-to-equity ratio mean?
48
1
What is the fixed asset turnover?
48
1
What does the fixed asset turnover reflect?
49
1
How may sales be related to fixed assets?
49
1
What is the meaning of the sales-to-fixed assets ratio?
50
1
Liabilities
50
4
Is there a reason to compare total liabilities to total assets?
50
1
What can you tell from the ratio of total debt to total assets?
51
1
How are assets compared to long-term debt?
51
1
What does the ratio of fixed assets to long-term debt mean to analysis?
52
1
How are total assets compared to long-term debt?
52
1
What is the significance of the asset coverage ratio?
53
1
Stockholders' Equity
54
15
What is stockholders' equity?
54
1
What makes stockholders' equity change?
55
1
How is stockholders' equity analyzed?
55
1
What is capital structure?
56
1
What is paid-in capital?
56
1
What are retained earnings?
57
1
What are capital structure ratios?
57
1
Is long-term debt always included as part of a coporation's capital structure?
58
1
What does the long-term debt ratio say about an organization?
59
1
What is the investors'-capital-to-sales ratio?
59
1
What does the ratio of investors' capital to sales indicate?
60
1
What is the ratio of net income to capital?
60
1
Is preferred stock included when calculating the ratio of net income to capital?
61
1
What does the ratio of net income to capital tell management?
61
1
What is the ratio of retained earnings to capital?
62
1
What does the ratio of retained earnings to capital indicate?
62
1
How is the capital-to-total-liabilities ratio computed?
62
1
What is the significance of the ratio of capital to total liabilities?
63
1
Can total liabilities be compared to equity?
63
1
What does the ratio of total liabilities to equity mean to the analyst?
64
1
What is the capital-to-noncurrent-assets ratio?
64
1
How important is the ratio of capital to noncurrent assets?
65
1
What is the ratio of captial employed?
65
1
What does the capital-employed ratio say about an organization?
66
1
How is the rate of return on capital computed?
67
1
What does the rate of return on capital employed tell management?
68
1
How is current debt compared to owners' equity?
68
1
What is a favorable current-debt-to-equity ratio?
69
1
Working Capital?
69
8
What is working capital?
69
1
What does working capital reflect?
70
1
How is average working capital computed?
70
1
What is the working capital turnover?
71
1
What does the working capital turnover represent?
71
1
Can working capital be compared to sales?
71
1
Of what use is the working-capital-to-sales ratio?
72
1
Can current assets and/or current liabilities (both balance sheet items) be compared to working capital?
72
1
Is it helpful to compare current assets or liabilities to working capital?
73
1
Can working capital be compared to current assets or current liabilities?
74
1
How does comparing working capital to current assets or current liabilities help management?
75
1
What is the inventory-to-working-capital ratio?
75
1
What is the significance of the inventory-to-working-capital ratio?
76
1
How is working capital related to funded debt?
76
1
Why compute the ratio of working capital to funded debt?
77
1
Liquidity Ratios
77
9
What is a liquidity ratio?
77
1
What is the current ratio?
78
1
What is the significance of the current ratio?
79
1
How is the acid test ratio calculated?
79
1
What does the acid test ratio say about an organization?
80
1
How does the cash ratio differ from the acid test?
80
1
Is there a ``good'' cash ratio?
81
1
What is the cash turnover ratio?
81
1
What does the cash turnover ratio indicate?
82
1
What is the accounts receivable turnover?
83
1
How is the receivables turnover converted to an annual figure?
83
1
How is the receivables turnover best analyzed?
84
1
How is the total asset turnover computed?
84
1
Of what use is the asset turnover ratio?
85
1
Profitability Ratios
86
5
What is meant by earnings per common share?
86
1
Do preferred stock dividends affect earnings per common share?
87
1
Who is interested in earnings per share?
87
1
Can earnings per share be computed for preferred stock?
87
1
What is the price-earnings (PE) ratio?
88
1
Is a high PE ratio favorable for investors?
88
1
What is the capitalization rate?
89
1
Of what significance is the capitalization rate?
89
1
What is book value?
89
1
What does book value mean?
90
1
How is the dividend-return ratio calculated?
90
1
How valuable is the common stock dividend yield?
90
1
Debt-Paying Capability
91
5
What is the velocity method for calculating an organization's debt-paying capability?
91
2
What is the calculation for the times-interest-earned ratio?
93
1
Does the times-interest-earned ratio change with time?
94
1
What does the times-interest-earned ratio tell analysts?
94
1
What is the times-preferred-dividend ratio?
94
1
What does the times-preferred-dividend ratio mean to the analyst?
95
1
What is the ratio for interest plus funded debt?
95
1
Leverage Ratios
96
5
What is leverage?
96
1
What are leverage ratios?
96
1
What is common stock leverage?
96
1
What does the common stock leverage factor indicate?
97
1
What is the ratio of net income to equity?
98
1
What is indicated by the ratio of net income to equity?
98
1
What is the ratio of interest paid to borrowed capital?
99
1
How do you calculate the ratio of borrowed capital to equity?
99
1
What is the funded capital ratio?
100
1
What is the importance of this ratio?
100
1
Analyzing the ``Top Line'': Sales Management Ratios
101
56
How Sales Contribute to Profit and Income: Vertical Analysis of the Income Statement
103
1
What is vertical analysis of the income statement?
103
1
Gross Profit
104
1
What is gross profit?
104
1
Can gross profit be expressed as a ratio of sales?
104
1
How does the gross-profit-to-sales ratio benefit management?
105
1
Income from Operations
105
3
What is income from operations?
105
1
Can income from operations be expressed as a ratio of sales?
106
1
How does the income-from-operations ratio benefit management?
106
2
Pretax Profit
108
1
What is pretax profit?
108
1
How is the ratio of pretax profit to sales computed?
109
1
Net Income
109
2
What is net income?
109
1
Why are net income ratios important?
110
1
How do you calculate the ratio of net income to sales?
110
1
Of what use is the net-income-to-sales ratio?
110
1
What are Sales Costing the Company?
111
1
Direct Costs (Costs-of-Sales)
111
5
What is cost of sales?
111
1
How is cost of sales compared to sales?
111
1
How is the cost-of-sales-to-sales ratio used?
112
1
How is the cost-of-sales-to-sales ratio used to evaluate actual data?
112
1
How would the cost-of-sales-to-sales ratio assist planners in making projections?
112
1
Can individual types of costs of sales be evaluated in terms of sales?
113
1
Can an individual type of cost be expressed as a percentage of overall COS?
114
1
What use is it to monitor individual cost-of-sale elements?
114
2
Direct Personnel Costs
116
1
What is the sales-to-direct-personnel relationship?
116
1
What is the relationship of sales to total personnel?
116
1
Indirect Expenses
117
1
What are indirect expenses?
117
1
Selling, General, and Administrative (G&A) Expenses
118
7
What are selling, general, and administrative expenses?
118
1
Can selling/G&A expenses be related to total sales?
119
1
Does this ratio benefit the sales manager?
119
1
Can selling/G&A expenses be compared to gross profit?
120
1
Does this ratio benefit the sales manager?
120
1
Can selling/G&A expenses be compared to net income?
120
1
Does this ratio benefit the sales manager?
121
1
Can selling/G&A expenses be compared individually to total sales, gross profit, or net income?
121
2
How is the rate of selling expenses and G&A per direct labor hour computed?
123
1
Of what benefit is the rate of selling/G&A expenses per direct labor hour?
124
1
What purpose is served by the ratio of selling/G&A to direct labor dollars?
124
1
Overhead
125
2
What is overhead?
125
1
Can indirect costs be compared to total costs?
125
1
What is the ratio of overhead to cost of sales?
126
1
What good does it do to compare overhead to cost of sales?
126
1
How Sales Affect a Company's Financial Status
127
1
Are sales reflected on the balance sheet?
127
1
Sales and Assets
128
5
What is the cash turnover ratio?
128
1
What does the cash turnover ratio indicate?
128
1
What is the fixed asset turnover?
129
1
What does the fixed asset turnover reflect?
130
1
How may sales be related to fixed assets?
130
1
What is the meaning of the sales-to-fixed-assets ratio?
131
1
How is the total asset turnover computed?
131
1
Of what use is the asset turnover ratio?
131
2
Sales and Capital
133
4
What is capital?
133
1
What is the investors'-capital-to-sales ratio?
134
1
What does the ratio of capital to sales indicate?
135
1
What is the ratio of capital employed?
135
1
What does the capital-employed ratio say about an organization?
136
1
How is the profit return on sales computed?
136
1
How is the rate of return on capital computed?
136
1
Sales and Working Capital
137
3
What is working capital?
137
1
What does working capital reflect?
138
1
How is average working capital computed?
138
1
What is the working capital turnover?
138
1
What does the working capital turnover represent?
139
1
Of what use is the working-capital-to-sales ratio?
139
1
How Sales Provides the Firm with Leverage
140
2
What is leverage?
140
1
What are leverage ratios?
140
1
What is the operating leverage ratio?
140
1
Why is the operating leverage factor important?
141
1
Does the operating leverage factor change?
141
1
Is the Company Making Money on Sales? Break-Even Analysis
142
3
What is the break-even point?
142
1
When is the break-even point calculation made?
143
1
Does the break-even point change?
143
1
How do fixed expenses affect the break-even point?
143
1
How do sales affect the break-even point?
144
1
Can the break-even calculation be used to determine the sales volume necessary to achieve a given level of operating income?
144
1
What is the Quality of Sales? Accounts Receivable
145
1
Accounts Receivable Turnover
145
2
What is the accounts receivable turnover?
145
1
How is the accounts receivable turnover converted to an annual figure?
146
1
How is the receivables turnover best analyzed?
146
1
Comparing Receivables to Sales
147
2
What is the receivables-to-sales ratio?
147
1
Why are quarterly receivables compared to annualized sales amounts?
148
1
How is the average receivables amount arrived at?
149
1
Average Collection Period
149
3
How is the average collection period calculated?
149
1
What does the average collection period mean?
150
1
What is the aging receivables procedure for estimating collections and cash flow?
150
1
What is the days-of-sales-in-receivables ratio (or factor)?
151
1
How is the days-of-sales-in-receivables ratio put to use?
152
1
Liquidation Limit
152
1
What is the liquidation limit?
152
1
What is the liquidation lag value of billed sales?
152
1
How are liquidation limit and liquidation lag value used?
153
1
Sales Backlog
153
1
How is backlog effectiveness measured?
153
1
Can Orders be Filled? Sales and Inventory
154
3
What is the sales-to-inventory ratio?
154
1
Does the sales-to-inventory ratio have to be annualized?
154
3
Containing Expenses: Cost Analysis
157
58
Evaluating the Impact of Personnel (Labor)
158
3
What is direct labor?
158
1
What is indirect labor?
158
1
How are direct labor and indirect labor compared?
159
1
Can indirect labor cost be compared to direct labor costs?
159
1
How is the indirect-to-direct-personnel ratio used?
160
1
Can direct and indirect labor be compared to total labor?
160
1
How Costs-of-Sales (Direct Expenses) Affect Profitability
161
7
What is cost of sales?
161
1
How is cost of sales compared to sales?
161
1
How is the cost-of-sales-to-sales ratio used?
162
1
How is the cost-of-sales-to-sales ratio used to evaluate actual data?
162
1
How would the cost-of-sales-to-sales ratio assist planners in making projections?
162
1
Can types of costs of sales be evaluated in terms of sales?
163
1
Can an individual type of cost be expressed as a ratio of total cost of sales?
164
1
What use is it to monitor individual cost-of-sale elements?
165
1
Can the total cost of sales be compared to product units?
166
1
Can individual elements of cost of sales be compared to units produced?
167
1
Can total cost of sales be expressed in terms of labor hours?
167
1
How Indirect Costs Affect Profitability
168
1
What are indirect expenses?
168
1
Indirect Costs per Product Unit
169
1
How are indirect expenses compared to product units?
169
1
How are indirect costs per product unit used in connection with direct costs per product unit?
169
1
Can individual indirect costs be related to units produced?
170
1
Selling, General and Administrative (G&A) Expenses
170
8
What are selling, general and administrative expenses?
170
1
How is the rate of selling/G&A per direct labor hour computed?
171
1
Of what benefit is the rate of selling/G&A per direct labor hour?
172
1
Can selling, general, and administrative expenses be compared to direct labor dollars?
172
1
What purpose is served by the ratio of selling/G&A to direct labor dollars?
173
1
Can selling, general, and administrative expenses be compared to gross profit?
173
1
Does this ratio benefit the cost manager?
174
1
Can selling, general, and administrative expenses be related to total sales?
174
1
Does this ratio benefit the cost manager?
175
1
Can selling, general, and administrative expenses be compared to net income?
175
1
Does this ratio benefit the cost manager?
176
1
Can selling expenses and G&A costs be compared individually to total sales, gross profit, and net income?
176
2
Overhead
178
15
What are overhead expenses?
178
1
Can individual overhead expenses be compared to total overhead expenses?
179
1
What purpose does it serve to compute ratios for individual expenses?
180
1
What does a comparison of two periods' overhead cost ratios tell the cost manager?
181
1
How are overhead costs compared to sales?
182
1
Can overhead be compared to total costs?
182
1
What is the ratio of overhead to cost of sales?
183
1
What good does it do to compare overhead to cost of sales?
184
1
How are overhead costs applied to a product before the expenses are known?
184
1
What is the ratio of total overhead to direct labor hours?
185
1
What benefit is there to comparing overhead to direct labor hours?
185
1
What is the ratio of total overhead to direct labor dollars?
186
1
What does the cost manager learn from the ratio of total overhead to direct labor dollars?
187
1
How is overhead computed in terms of prime cost?
187
1
What is the machine hour rate method?
188
1
What is the product unit cost rate?
189
1
What if a firm cannot use units produced in the product unit cost method?
189
2
How is the rate of fringe benefits to direct labor hours calculated?
191
1
What does the fringe-benefit-to-direct-labor-hours rate tell the cost manager?
191
1
How is the ratio between fringe benefits and total labor dollars computed?
192
1
What does the fringe benefit-to-total-labor-dollars rate tell the cost manager?
192
1
Weighing the Impact of Costs on Operating (Operational) Income
193
1
What is operating (operational) income?
193
1
How to Evaluate Purchases, Payables, and Disbursements
193
4
What is the days-purchases-in-payables ratio?
193
1
What is the ratio of daily purchases versus daily disbursements?
194
1
What are cash disbursements?
195
1
What is the accounts-payable-turnover ratio?
195
1
How is the accounts-payable-turnover ratio used?
196
1
How is the ratio of disbursements to accounts payable computed?
196
1
What is the purpose of the disbursements-to-accounts-payable ratio?
197
1
Honoring Trade Payable Commitments While Curtailing Expenses
197
1
What is meant by ``days purchasing outstanding''?
197
1
Controlling Inventory Levels
198
1
Why are inventory controls important?
198
1
Which inventory ratios are used the most?
198
1
Inventory and Cost of Sales
199
3
What is the inventory-to-cost-of-sales ratio?
199
1
How is the ratio of inventory to cost of sales used?
199
1
Is the inventory-to-cost-of-sales ratio the same or similar for each quarter as it is for the year?
199
1
Can the inventory-to-cost-of-sales ratio be annualized?
200
1
How do you compute the ratio of cost of sales to average inventory?
200
1
Is the cost-of-sales-to-average-inventory ratio the same or similar for each quarter as it is for the year?
201
1
Can the cost-of-sales-to-average-inventory ratio be annualized?
201
1
Should inventory turnover ratios be computed without regard to the type of inventory?
202
1
Average Days of Inventory
202
2
What is the average-days-of-inventory ratio?
202
1
How can the average age of inventories be used?
203
1
Sales and Inventory
204
2
What is the sales-to-inventory ratio?
204
1
Does the sales-to-inventory ratio have to be annualized?
205
1
Working Capital and Inventory
206
1
What is working capital?
206
1
What is the inventory-to-working-capital ratio?
206
1
What is the significance of the inventory-to-working-capital ratio?
206
1
How Costs Relate to Volume and Profit
207
2
What is the operating leverage ratio?
207
1
Why is the operating leverage factor important?
208
1
Does the operating leverage factor change?
208
1
Is the Company Making Money? Costs and the Break-Even Point
209
6
What is the break-even point?
209
1
When is the break-even point calculation made?
210
1
Does the break-even point change?
210
1
How do fixed expenses affect the break-even point?
210
1
How do sales affect the break-even point?
211
1
Can you estimate how much variable expenses will change with sales?
211
1
What purpose does the per-unit variable cost serve?
212
1
Can per-unit fixed costs be computed?
213
1
Can the ``break-even'' plant capacity be calculated?
213
2
Monitoring Cash Receipts: The Accounts Receivable Manager
215
26
Assessing the Company's Cash Position
217
8
What is cash flow?
217
1
What is included in cash reciepts?
218
1
Which items are included in cash disbursements?
218
1
How are cash flow ratios calculated?
219
1
What is a cash flow statement?
220
1
What do cash flow ratios do for the accounts receivable manager?
220
1
How are cash flow ratios analyzed for reasonableness?
221
1
Are there other ways to analyze a company's cash position?
222
1
What is the ratio of cash receipts to billed sales and progress payments?
222
1
How do you computer the ratio between the ending accounts receivable balance and the sum of billed sales and progress payments?
223
1
How do you compute the ratio between the ending accounts receivable balance and the sum of billed sales, progress payments, and beginning balance?
223
1
What is the ratio of the ending receivables balance to cash receipts?
224
1
How are Accounts Receivable Affecting the Cash Position?
225
1
How are ratios used in collecting accounts receivable?
225
1
Accounts Receivable Turnover
225
2
What is the (accounts) receivable turnover?
225
1
How is the receivables turnover converted to an annual figure?
226
1
How is receivables turnover best analyzed?
226
1
Comparing Receivables to Sales
227
2
What is the receivables-to-sales ratio?
227
1
Why are quarterly receivables compared to annualized sales amounts?
228
1
How is the average receivables amount arrived at?
228
1
Average Collection Period
229
3
How is the average collection period calculated?
229
1
What does the average collection period mean?
230
1
What is the aging receivables procedure for estimating collections and cash flow?
230
1
What is the days-of-sales-in-receivables ratio (or factor)?
231
1
How is the days-of-sales-in-receivables ratio put to use?
231
1
Evaluating the Timeliness of Billings and Collections
232
1
Current Period Collections and Incurred Costs
232
1
How do you compute the ratio of current period collection to incurred costs?
232
1
What does the current-period-collection rate reflect?
233
1
Prior Period Billings and Current Period Costs
233
1
Can prior period billings be compared to current period costs?
233
1
What can be determined from the ratio of lagged (prior period) costs to current period costs?
233
1
Is there another way to monitor the rate at which collections are made?
234
1
Prior Period Billings and Total Collections
234
1
How do you compare prior period billings with total collections?
234
1
What does this ratio mean to the accounts receivable manager?
235
1
Liquidation Limit
235
1
What is the liquidation limit?
235
1
What is the liquidation lag value of billed sales?
235
1
How are the liquidation limit and liquidation lag value used?
236
1
Gauging the Customer's Debt-Paying Capability in the Worst Case
236
1
Velocity Method
236
5
What is the velocity method?
236
2
What is the calculation for the times-interest-earned ratio?
238
1
Does the times-interest-earned ratio change with time?
239
1
What does the times-interest-earned ratio tell analysts?
239
1
What is the ratio for interest plus funded debt?
239
2
Regulating the Outflow of Cash: The Accounts Payable Manager
241
17
How are Disbursements Affecting Cash Flow?
244
4
What is cash flow?
244
1
What is included in cash receipts?
244
1
What are cash disbursements?
244
1
What are cash flow ratios?
245
1
What is a cash flow statement?
246
1
What do cash flow ratios do for the accounts payable manager?
246
1
How are cash flow ratios analyzed for reasonableness?
247
1
Balancing Purchases, Payables, and Disbursements
248
3
What is the day-purchases-in-payables ratio?
248
1
What is the ratio of daily purchases versus daily reimbursements?
248
1
What is the accounts-payable-turnover?
248
1
How is the accounts-payable-turnover used?
249
1
How is the ratio of disbursements to accounts payable computed?
250
1
What is the purpose of the disbursements-to-accounts-payable ratio?
251
1
Honoring Trade Payable Commitments
251
1
What is meant by ``days purchasing outstanding''?
251
1
Can the Company Meet Its Cash Obligations? Liquidity Ratios
252
6
What is a liquidity ratio?
252
1
What is the current ratio?
252
1
What is the significance of the current ratio?
253
1
How is the acid test ratio calculated?
253
2
What does the acid test ratio say about an organization?
255
1
How does the cash ratio differ from the acid test?
255
1
Is there a ``good'' cash ratio?
256
1
What is the cash turnover ratio?
256
1
What does the cash turnover ratio indicate?
256
2
Meeting Sales Demand Efficiently and Effectively: The Production Manager
258
53
How Production Volume Affects Costs and Profits
260
1
The Break-Even Point
260
2
What is the break-even point?
260
1
When is the break-even point calculation made?
260
1
Does the break-even point change?
261
1
How do fixed expenses affect the break-even point?
261
1
How do sales affect the break-even point?
261
1
Variable Expenses
262
2
Can you estimate how much variable expenses will change with sales?
262
1
What purpose does the per-unit variable cost serve?
263
1
Can per-unit fixed costs be computed?
263
1
Sales Volume
264
1
Can the break-even calculation be used to determine the sales What does the production manager learn from the ratio of total overhead to direct labor dollars?
284
Volume necessary to achieve a given level of operating income?
264
1
Plant Capacity
265
1
Can the ``break-even'' plant capacity be calculated?
265
1
Monitoring and Estimating Direct Expenses (Cost of Sales)
265
7
What is cost of sales?
265
1
Does the cost of sales bear a relationship to sales?
266
1
How is the cost-of-sales-to-sales ratio used?
266
1
How is this ratio used to evaluate actual data?
266
1
How would the cost-of-sales-to-sales ratio assist production managers in making projections?
267
1
Can types of costs of sales be evaluated like overall cost of sales?
267
1
Can an individual cost be expressed as a ratio of overall cost of sale?
268
1
What use is it to monitor individual cost-of-sale elements?
269
1
Can the total cost of sales be compared to product units?
270
1
Can individual elements of cost of sales be compared to units produced?
271
1
Analyzing and Utilizing the Work Force
272
1
Direct and Indirect Labor
272
3
What is the difference between direct and indirect labor?
272
1
How are direct and indirect labor compared?
272
1
Can this ratio be expressed in terms of payroll dollars?
273
1
How is the indirect-to-direct-personnel ratio used?
273
1
Can direct and indirect labor be compared to total labor?
274
1
Direct Personnel and Sales
275
1
What is the sales-to-direct-personnel relationship?
275
1
Can total cost of sales be expressed in terms of labor hours?
275
1
Allocating Indirect (``Overhead'') Costs to Production
276
1
What are indirect expenses?
276
1
Selling, General, and Administrative (G&A) Expenses
277
4
What are selling, general, and administrative expenses?
277
1
How are selling/G&A expenses compared to product units?
278
1
How are indirect costs per product unit used in connection with direct costs per product?
278
1
How is the rate of selling/G&A expense per direct labor hour computed?
279
1
Of what benefit is the rate of selling/G&A per direct labor hour?
279
1
Can selling/G&A expenses be compared to direct labor dollars?
279
1
What purpose is served by the ratio of selling/G&A to direct labor dollars?
280
1
Can selling/G&A costs be related to units produced?
280
1
Overhead
281
12
What are overhead expenses?
281
1
Can individual expenses be compared to total overhead expenses?
282
1
Can overhead costs be applied to a product?
283
1
How are indirect costs applied to a product before the expenses are known?
283
1
How is overhead compared to direct labor dollars?
284
1
How is overhead compared to direct labor hours?
285
1
What benefit is there to comparing overhead to direct labor hours?
285
1
How is overhead computed in terms of prime cost?
285
1
What is the machine hour rate method?
286
1
What is the product unit cost rate?
287
1
What if a firm cannot use units produced in the product unit cost method?
287
2
What is the ratio of overhead to cost of sales?
289
1
What good does it do to compare overhead to cost of sales?
289
1
How is the rate of fringe benefits to direct labor hours calculated?
290
1
What does the fringe-benefit-to-direct-labor-hours rate tell the production manager?
290
1
How is the ratio between fringe benefits and total labor dollars computed?
291
1
What does the fringe-benefit-to-total-dollars rate tell the production manager?
291
2
Appendix
Tools for Financial and Operations Analysis
293
1
Averaging
294
5
What is an average?
294
1
How is the arithmetic mean calculated?
295
1
What is the algebraic method of calculating the arithmetic mean?
295
1
What is the deviation method for calculating the arithmetic mean?
296
1
How is the median calculated?
296
2
What is the mode, and how is it calculated?
298
1
What is the geometric mean?
299
1
Deviation Analysis
299
3
Why is a measure of deviation important?
299
1
What is mean deviation?
299
1
How is mean deviation calculated?
299
2
How is standard deviation computed?
301
1
Determining Trends
302
4
What is the freehand method?
302
1
How is the semiaveraging method used?
303
1
What is the moving average procedure?
304
2
Ratios
306
1
What are ratios?
306
1
How are ratios used?
306
1
Preparing Graphs
306
3
What is a graph?
306
3
How does a graph assist in analysis?
309
1
Comparisons with Industry Norms
309
2
What are industry norms?
309
1
Where can industry norms be obtained?
310
1
Which ratios are published?
310
1
Glossary
311
10
Index
321