FINANCIAL ANALYSIS

Question 1

Receivables turnover (A)

Answer 1

annual sales / average receivables

Question 2

Days of sales outstanding (A)

Answer 2

365 / receivables turnover

Question 3

Inventory turnover (A)

Answer 3

cost of goods sold / average inventory

Question 4

Days of inventory on hand (A)

Answer 4

365 / inventory turnover

Question 5

Accounts payable turnover (A)

Answer 5

purchases / average accounts payable

Question 6

Number of days payable (A)

Answer 6

365 / payables turnover ratio

Question 7

Total asset turnover (A)

Answer 7

revenue / average total assets

Question 8

Fixed asset turnover (A)

Answer 8

revenue / average net fixed assets

Question 9

Working capital turnover (A)

Answer 9

revenue / average working capital

Question 10

Current ratio (L)

Answer 10

current assets / current liabilities

Question 11

Quick ratio (L)

Answer 11

(cash + marketable securities + receivables) / current liabilities

Question 12

Cash ratio (L)

Answer 12

(cash + marketable securities) / current liabilities

Question 13

Defensive interval (L)

Answer 13

(cash + marketable securities) / average daily expenditures

Question 14

Cash conversion cycle (L)

Answer 14

(days of sales outstanding) + (days of inventory on hand) - (number of days payable)

Question 15

Debt-to-equity (S)

Answer 15

total debt / total shareholder’s equity

Question 16

Debt-to-capital (S)

Answer 16

total debt / (total debt + total shareholder’s equity)

Question 17

Debt-to-assets (S)

Answer 17

total debt / total assets

Question 18

Financial leverage (S)

Answer 18

average total assets / average total equity

Question 19

Interest coverage (S)

Answer 19

EBIT / interest payments

Question 20

Fixed charge coverage (S)

Answer 20

(EBIT + lease payments) / (interest payments + lease payments)

Contractual/periodic charges.

Question 21

Net profit margin (P)

Answer 21

net income / revenue

Question 22

Gross profit margin (P)

Answer 22

(revenue - COGS) / revenue

Question 23

Operating profit margin (P)

Answer 23

Operating income / revenue

Question 24

Operating profit margin (P) 2

Answer 24

EBIT / revenue

Question 25

Pretax margin (P)

Answer 25

EBT / revenue

Question 26

Return on assets (ROA) (P)

Answer 26

net income / average total assets

Question 27

Operating return on assets (P)

Answer 27

Operating income / average total assets

Question 28

Operating income

Answer 28

EBIT

Question 29

Return on total capital (P)

Answer 29

EBIT / average total capital

Question 30

Return on equity (P)

Answer 30

net income / average total equity

Question 31

Return on common equity (P)

Answer 31

(net income - preferred dividends) / average common equity

Question 32

Free cash flow to the firm FCFF 2

Answer 32

cash flow from operations + [interest expense * (1-tax rate)] - fixed capital investments FCFF is for equity and debt holders

Question 33

Free cash flow to equity FCFE

Answer 33

cash flow from operations + net borrowing - fixed capital investment net borrowing is new debt

Question 34

Common size income statement

Answer 34

divide by revenue

Question 35

Common size balance sheet

Answer 35

divide by total assets

Question 36

Common size cash flow ratios

Answer 36

divide by revenue

Question 37

DuPont (original)

Answer 37

ROE = net profit margin * asset turnover * leverage ratio