Financial ratios

Question 1

Gross Margin

Answer 1

Gross Profit / Sales

Question 2

Operating Margin

Answer 2

Operating Income / Sales

Question 3

EBIT margin

Answer 3

EBIT / sales

Question 4

Net profit margin

Answer 4

Net income / sales

Question 5

Current ratio

Answer 5

Current Assets / Curret Liabilities

Question 6

Quick ratio

Answer 6

(Cash+short-term investments+acc receivable) / current liabilities

Question 7

Cash Ratio

Answer 7

Cash / (Current Liabilities)

Question 8

Accounts Receivable Days

Answer 8

Acc receivable / Average daily sales

Question 9

Acc payable days

Answer 9

Acc payable / Average daily cost of sales

Question 10

Inventory days

Answer 10

Average daily cost of sales

Question 11

Interest Coverage ratio

Answer 11

EBIT / Interest expense

Question 12

EBITDA / Interest Coverage

Answer 12

EBITDA / Interest expense

Question 13

Debt-Equity book ratio

Answer 13

Total debt / (Book value of equity)

Question 14

Debt-Equity market ratio

Answer 14

Total Debt / (Market value of equity)

Question 15

Debt-to-capital ratio

Answer 15

Total debt / (Total equity+Total debt)

Question 16

Debt-to-enterprise ratio

Answer 16

Net debt / Enterprise value

Question 17

Equity multiplier (book)

Answer 17

Total assets / Book value of equity

Question 18

Equity multiplier (market)

Answer 18

Total assets / Market value of equity

Question 19

Market-to-book ratio

Answer 19

(Market value of equity) / (book value of equity)

Question 20

Price-earning ratio

Answer 20

Share price / Earnings per share

Question 21

Enterprise value to sales

Answer 21

Enterprise value / sales

Question 22

Enterpire value to EBIT

Answer 22

Enterprise value / EBIT

Question 23

Asset turnover

Answer 23

Sales / Total assets

Question 24

Return on equity

Answer 24

Net income / book value of equity

Question 25

Return on assets

Answer 25

(Net income+interest expense) / Book value of assets

Question 26

Return on invested captial

Answer 26

EBIT*(1-Tax%) / (Book value of equity + Net debt)

Question 27

Market capitalization

Answer 27

Curret share price * amount of shares outstanding

Question 28

Enterprise value formula

Answer 28

Enterprise Value (EV) = Market capitalization (Number of Shares Outstanding * Share Price) + Interest Bearing Debt − Cash

Question 29

P-E ratio

Answer 29

= price per share / earnings per share (net income / shares)

Question 30

Current ratio

Answer 30

Current assets/liabilities

Question 31

Quick ratio

Answer 31

= (cash +marketable securities + accounts receivable) / current liabilities

Question 32

remember that an arbitrage oppurtunity has a positive

Answer 32

NPV

Question 33

Selling a security that you do not own but borrow from another individual is called

Answer 33

short selling which is very risky

Question 34

Free Cash Flows

Answer 34

= Net Income + Depreciation - Capital Expenditures – Change in Net Working Capital

Question 35

Net Income

Answer 35

EBIT (1-corporate tax rate)

Question 36

Enterprise Value

Answer 36

Market Value of Equity + Debt - Cash

Question 37

1 + real interest rate =

Answer 37

1 + nominal interest rate / 1 + inflation rate

Question 38

coupon payment formula

Answer 38

coupon rate * face value / number of coupon payments per year

Question 39

YTM of a zero coupon bond

Answer 39

(Face value / PV) ^ 1/n - 1

Question 40

Present value of zero coupon bond =

Answer 40

FV / (1 + YTM)^n

Question 41

EBIT =

Answer 41

Gross Profit - Operating Expenses - Depreciation - Amortization