Ratios - Profitability and Equity Flashcards
What are profitability Ratios used for?
These measure aspects of a firm’s operating (income/loss) results on a relative basis
What is the Profit Margin Ratio?
Net Income/Net sales
Measures net profitability on sales
What is the return on total assets ratio?
(Net Income + (addback) Interest Expense (net of tax effect))/Average Total Assets
Measures rate of return on total assets and indicates the efficiency with which invested assets are used
What is the return on Owners’ Equity Ratio?
Net Income/Average Stockholders’ Equity (Beginning +Ending/2)
Measures rate of return (earnings) on common stockholders’ investment
What is the Earnings Per Share (EPS) ratio?
(Net Income-Preferred Dividends (obligation for the period only))/Weighted Average number of shares outstanding
Measures Income earned per (Average) share of common stock. Indicates ability to pay dividends to common shareholders
What is the Price-Earnings Ratio (P/E Ratio)?
Market Price for a common share/Earnings per (common) share (EPS)
Measures the price of a share of common stock relative to its latest earnings per share. Indicates a measure of how the market values the stock, especially when compares with other stocks.
What are the common stock dividend payout ratios?
Total Basis=Cash Dividends to common shareholders/Net income to common shareholder
Per Share Basis=Cash dividends per common share/Earnings per common share
measures the extent (percent) of earnings distributed to common shareholders
What is the common stock yield ratio?
Dividend per common share/Market price per Common Share
Measures the rate of return (yield) per share of common stock
What is the Debt to Equity Ratio?
Total Liabilities/Total Shareholders’ Equity
Measure relative amounts of assets provided by creditors and shareholders
What is the Owners’ Equity Ratio?
Shareholders Equity/Total Assets
Measures the proportion of assets provided by shareholders
What is the Debt Ratio?
Total Liabilities/Total Assets
Measures the proportion of assets provided by creditors. Indicates the extent of leverage in funding the equity
What is the Book Value per common stock ratio?
Common Shareholders’ Equity/Number of outstanding common shares
Measures the per share amount of common shareholders’ claim to assets
What is the Book Value per preferred share ratio?
Preferred Shareholders’ Equity(Including Dividends in arrears)/Number of Outstanding Preferred Stocks
Measures the per share amount of preferred shareholders’ claim to assets
