FSA - FORMULAS

Question 1

Current Ratio

Answer 1

Current Ratio = Current Assets / Current Liabilities

Question 2

Quick Ratio (Acid-Test)

Answer 2

Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Question 3

Cash Ratio

Answer 3

Cash Ratio = (Cash + Marketable Securities) / Current Liabilities

Question 4

Inventory Turnover

Answer 4

Inventory Turnover = Cost of Goods Sold / Average Inventory

Question 5

Days Inventory on Hand (DOH)

Answer 5

DOH = Days in the Period/ Inventory Turnover

Question 6

Receivables Turnover

Answer 6

Receivables Turnover = Net Credit Sales / Average Accounts Receivable

Question 7

Days Sales Outstanding (DSO)

Answer 7

DSO = Days in the Period / Receivables Turnover

Question 8

Payables Turnover

Answer 8

Payables Turnover = Purchases / Average Accounts Payable

Question 9

Number of Days Payables

Answer 9

Number of Days Payables = Days in the Period / Payables Turnover

Question 10

Cash Conversion Cycle

Answer 10

Cash Conversion Cycle = DOH + DSO − Number of Days Payables

Question 11

Total Asset Turnover

Answer 11

Total Asset Turnover = Revenue / Average Total Assets

Question 12

Fixed Asset Turnover

Answer 12

Fixed Asset Turnover = Revenue / Average Net Fixed Assets

Question 13

Working Capital Turnover

Answer 13

Working Capital Turnover = Revenue / Average Working Capital

Question 14

Debt-to-Equity Ratio

Answer 14

Debt-to-Equity = Total Debt / Total Shareholders’ Equity

Question 15

Debt Ratio

Answer 15

Debt Ratio = Total Debt / Total Assets

Question 16

Financial Leverage Ratio

Answer 16

Financial Leverage = Average Total Assets / Average Shareholders’ Equity

Question 17

Interest Coverage Ratio

Answer 17

Interest Coverage = EBIT / Interest Expense

Question 18

Fixed Charge Coverage Ratio

Answer 18

Fixed Charge Coverage = (EBIT + Lease Payments) / (Interest + Lease Payments)

Question 19

Gross Profit Margin

Answer 19

Gross Profit Margin = Gross Profit / Revenue

Question 20

Operating Profit Margin

Answer 20

Operating Profit Margin = Operating Income / Revenue

Question 21

Net Profit Margin

Answer 21

Net Profit Margin = Net Income / Revenue

Question 22

Pre-Tax Margin

Answer 22

Pre-Tax Margin = Earnings Before Taxes / Revenue

Question 23

Return on Assets (ROA)

Answer 23

ROA = Net Income / Average Total Assets

Question 24

ROA (alternative formula)

Answer 24

ROA = (Net Income + Interest Expense × (1 − Tax Rate)) / Average Total Assets

Question 25

Return on Equity (ROE)

Answer 25

ROE = Net Income / Average Shareholders' Equity

Question 26

Return on Common Equity (ROCE)

Answer 26

ROCE = Net Income Attributable to Common Equity / Average Common Equity

Question 27

Basic Earnings Per Share (Basic EPS)

Answer 27

EPS = (Net Income − Preferred Dividends) / Weighted Average Common Shares Outstanding

Question 28

Diluted EPS

Answer 28

Diluted EPS = Adjusted Net Income / Adjusted Weighted Average Shares Outstanding

Question 29

Dividend Payout Ratio

Answer 29

Dividend Payout = Common Share Dividends / Net Income Attributable to Common Shares

Question 30

Retention Ratio (b)

Answer 30

Retention Ratio = 1 − Dividend Payout Ratio

Question 31

Sustainable Growth Rate (SGR)

Answer 31

SGR = ROE × Retention Ratio

Question 32

Operating ROA

Answer 32

Operating ROA = Operating Income / Average Total Assets

Question 33

DuPont ROE (3-step)

Answer 33

ROE = Net Profit Margin × Total Asset Turnover × Financial Leverage

Question 34

DuPont ROE (5-step)

Answer 34

ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage

Question 35

Tax Burden (DuPont)

Answer 35

Tax Burden = Net Income / EBT (Earnings Before Taxes)

Question 36

Interest Burden (DuPont)

Answer 36

Interest Burden = EBT / EBIT

Question 37

EBIT Margin (DuPont)

Answer 37

EBIT Margin = EBIT / Revenue

Question 38

Comprehensive Income

Answer 38

Comprehensive Income = Net Income + Other Comprehensive Income

Question 39

Operating Cycle

Answer 39

Operating Cycle = Days Inventory on Hand + Days Sales Outstanding

Question 40

Net Operating Cycle (Cash Conversion Cycle)

Answer 40

Net Operating Cycle = Operating Cycle − Days Payables

Question 41

Capital Adequacy Ratio (for financial firms)

Answer 41

Capital Adequacy Ratio = Tier 1 Capital / Risk-Weighted Assets

Question 42

Straight-Line Depreciation Formula

Answer 42

Depreciation Expense = (Cost − Residual Value) / Useful Life

Question 43

Declining Balance Depreciation Formula

Answer 43

Depreciation Expense = Beginning Book Value × Depreciation Rate

Question 44

Double Declining Balance (DDB) Depreciation

Answer 44

DDB Depreciation = 2 × (1 / Useful Life) × Beginning Book Value

Question 45

Units-of-Production Depreciation Formula

Answer 45

Depreciation per Unit = (Cost − Residual Value) / Estimated Total Units; Depreciation Expense = Depreciation per Unit × Units Produced

Question 46

Amortization of Intangible Assets

Answer 46

Amortization Expense = (Cost − Residual Value) / Useful Life (only for finite-lived intangibles)

Question 47

Recoverable Amount (IFRS)

Answer 47

Recoverable Amount = Higher of (Fair Value − Selling Costs) and Value in Use

Question 48

Impairment Loss (IFRS)

Answer 48

Impairment Loss = Carrying Amount − Recoverable Amount

Question 49

Impairment Loss (US GAAP)

Answer 49

Impairment Loss = Carrying Amount − Fair Value (if Carrying Amount > Undiscounted Cash Flows)

Question 50

Diluted EPS with Convertible Preferred Shares

Answer 50

Adjust numerator: Add back Preferred Dividends; Adjust denominator: Add shares from conversion

Question 51

Diluted EPS with Convertible Bonds

Answer 51

Adjust numerator: Add Interest Expense × (1 − Tax Rate); Adjust denominator: Add shares from bond conversion

Question 52

Diluted EPS with Stock Options or Warrants (Treasury Stock Method)

Answer 52

Incremental Shares = (Market Price − Exercise Price) × Options Outstanding / Market Price

Question 53

Anti-dilution rule

Answer 53

Potential common shares are included in diluted EPS only if they reduce EPS