Exam 1

Question 1

(NI/Avg SHE) = (NI/Avg total assets) * (Avg total assets/Avg SHE)
? = ROA * FL

Answer 1

Return on Equity (ROE)

Question 2

(NI - preferred dividends) / (Avg SHE - Avg preferred equity)

Answer 2

Return on Capital Employed (ROCE)

Question 3

NI/Avg total assets = (NI/sales) * (Sales/Avg total assets)

Answer 3

Return on Assets (ROA)

Question 4

Sales/Avg total assets

Answer 4

Asset Turnover

Question 5

(Revenue - COGS)/Revenue

Profitability

Answer 5

Gross Proft Margin

Question 6

Net Income/Revenue
where Net Income is revenue - COGS - operating expenses - other expenses - taxes
Net Income usually given
Profitability

Answer 6

Profit Margin

Question 7

Sales/Avg AR

Productivity

Answer 7

AR Turnover

Question 8

COGS/Avg Inventory

Productivity

Answer 8

Inventory Turnover

Question 9

COGS/Avg AP

Productivity

Answer 9

AP Turnover

Question 10

DSO + DIO - DPO

Productivity

Answer 10

Cash Conversion Cycle

Question 11

365/AR turnover

Productivity

Answer 11

DSO

Question 12

365/Inventory Turnover

Productivity

Answer 12

DIO

Question 13

365/AP turnover

Productivity

Answer 13

DPO

Question 14

Sales/Avg PPE

Productivity

Answer 14

PPE turnover

Question 15

Avg total assets/Avg SHE

Answer 15

Financial Leverage

Question 16

Total liabilities/total equity
Financial leverage
A solvency ratio

Answer 16

Total liabilities to equity

Question 17

EBIT/interest expense, gross

Financial Leverage

Answer 17

Times Interest Earned

Question 18

NI+(Net interest expense*(1-statutory tax rate))/Avg total assets

Answer 18

Adjusted ROA

Question 19

NOPAT/Avg NOA = (NOPAT / Sales) * (Sales / Avg NOA)

? = NOPM * NOAT

Answer 19

Return on Net Operating Assets (RNOA)

Question 20

Do total assets - non operating items like cash & cash equivs and short term investments THEN subtract your second part which you find by doing total liabilities - current debt - short term debt - LT debt

Answer 20

Find NOA

Question 21

Nonoperating liabilities - non operating assets

Answer 21

Net Nonoperating Obligation (NNO)

Question 22

NOPAT/Sales

Part of RNOA

Answer 22

Net Operating Profit Margin (NOPM)

Question 23

Sales/Avg NOA

Part of RNOA

Answer 23

Net Operating Asset Turnover (NOAT)

Question 24

Nonoperating liabilities - non operating assets

Answer 24

Net Nonoperating Obligations

Question 25

``` NOA = Nonoperating liabilities - non operating assets + SHE NOA = NNO + SHE ```

Answer 25

Invested Capital

Question 26

= NNO + SHE | = Nonoperating liabilities - non operating assets + SHE

Answer 26

Non-operating Assets (NOA)

Question 27

NOPAT / Invested Capital

Answer 27

Return On Invested Capital (ROIC)

Question 28

= NOPBT aka operating income - tax on operating profit Tax on operating profit = (tax expense + (pretax non-operating expense * statutory tax rate)) Tax shield part is after the plus

Answer 28

Net Operating Profit After Tax (NOPAT)

Question 29

Operating income - (income tax expense + (pretax net non operating expense * statutory tax rate)) IN PARENTHESIS IS THE TAX SHIELD

Answer 29

Net Operating Profit After Tax (NOPAT)

Question 30

Operating return (via RNOA) + Nonoperating returns

Answer 30

ROE

Question 31

ROA * FL

Answer 31

ROE

Question 32

PM * AT

Answer 32

ROA

Question 33

``` Financial Leverage (FLEV) * Spread ((Average Net Nonoperating Obligations (Avg NNO) / Average SHE) * (RNOA-NNEP) ```

Answer 33

Nonoperating Return

Question 34

RNOA + FLEV * Spread

Answer 34

ROE

Question 35

Average NNO/Average equity

Answer 35

FLEV

Question 36

RNOA - NNEP

Answer 36

Spread

Question 37

NNE/Average NNO

Answer 37

Net Nonoperating Expense Percent (NNEP)

Question 38

[RNOA+(FLEV*Spread)] * NCI ratio

Answer 38

ROE

Question 39

Chance of default * loss given default

Answer 39

Expected credit loss

Question 40

EBITDA/Interest Expense, gross | Always higher that TIE ratio

Answer 40

EBITDA Coverage Ratio

Question 41

Cash from operations/short-term debt + long-term debt

Answer 41

Cash from operations to total debt

Question 42

(cash from operations-CAPEX) / (short term debt + long term debt)

Answer 42

Free operating cash flow to total debt

Question 43

Current assets / current liabilities | Liquidity ratio

Answer 43

Current ratio

Question 44

(Cash + marketable securities + AR) / current liabilities | Liquidity ratio

Answer 44

Quick ratio

Question 45

(LT debt including current portion + ST debt) / SHE | A solvency ratio

Answer 45

Debt-to-equity ratio

Question 46

Any credit rating above Ba1 (Moody's) or BB+, need to be above BBB or Baa3

Answer 46

Investment Grade

Question 47

Cost - salvage value

Answer 47

Depreciation Base

Question 48

1 / useful life

Answer 48

Depreciation rate

Question 49

(Cost - salvage) / useful life

Answer 49

Straight line depreciation

Question 50

Machine at cost - depreciation

Answer 50

Book value

Question 51

- Records depreciation according to asset use. - The depreciation base is cost less salvage value. - The depreciation rate is the units produced and sold during the year compared with the total expected units to be produced and sold.

Answer 51

Units-of-production method

Question 52

an accelerated method, is required by the U.S. IRS to calculate taxable income.

Answer 52

Modified Accelerated Cost Recovery System (MACRS)

Question 53

Tax expense/Income before tax

Answer 53

Average (effective) tax rate

Question 54

Recognize revenue as a proportion of total costs incurred to fulfill the contract. For example, if 15% of the total expected cost to create the product are incurred in the current period, 15% of contract is recognized as revenue.

Answer 54

Cost-to-cost method