Financial Ratios

Question 1

Current Ratio

Answer 1

Current Assets/Current Liabilities

Question 2

Quick Ratio

Answer 2

(Current Assets - Inventory)/Current Liabilities

Question 3

Average Collection Period

Answer 3

AR/Daily Credit Sales

Question 4

AR Turnover

Answer 4

Credit Sales/AR

Question 5

Inventory Turnover

Answer 5

COGS/Inventory

Question 6

Total Asset Turnover

Answer 6

Sales/Total Assets

Question 7

Fixed Asset Turnover

Answer 7

Sales/Fixed Assets

Question 8

Operating Income Return on investment

Answer 8

OIROI=Operating Income/Total Assets

Question 9

Debt Ratio

Answer 9

Total Debt/Total Assets

Question 10

Times Interest Earned

Answer 10

EBIT/Interest Expense

Question 11

ROA

Answer 11

Net Income/Total Assets

Question 12

ROE

Answer 12

Net Income/Total Equity

Question 13

Gross Margin

Answer 13

Sales-COGS/Sales

Question 14

Operating Margin

Answer 14

EBIT/Sales

Question 15

Net Margin

Answer 15

Net Income/Sales

Question 16

DuPont Equation

Answer 16

ROE=Net Profit Margin x Asset Turnover x Leverage Multiplier

Question 17

ROIC (rtrn on invst cap)

Answer 17

NOPAT/ (Costly Capital)

Question 18

NOPAT

Answer 18

NOPAT = EBIT-Cash Taxes

Question 19

Free Cash Flow to the Firm

Answer 19

FCFF = EBIT - Cash Tax Payments + Depreciation - CAPEX - Increases in NWC

Question 20

Cash Tax Payments

Answer 20

Cash Tax Payments = Total tax payments from the income statement

Question 21

CAPEX

Answer 21

Capital Expenditure (gross property, plant, and equipment) changes from two balance sheets

Question 22

NWC

Answer 22

NWC = Net Working Capital (current assets - current liabilities) changes from two balance sheets

Question 23

FCFE

Answer 23

Free Cash Flow to Equity Holders = Net Income + Depreciation - CAPEX - Increases in NWC + Increases in Net Long-Term Debt

Question 24

Leverage Multiplier

Answer 24

LM = Liabilities/Equity + 1

Question 25

Dupont Equation

Answer 25

ROE= NI/S x S/A x (L/E + 1)

Question 26

Economic Value Added

Answer 26

EVA=NOPAT - [WACC x (costly capital)]

Question 27

Debt-to-Equity

Answer 27

Debt-to-Equity = Debt / Equity