Income Statement Ratios Flashcards Preview

CFA LEVEL 1 NOTES > Income Statement Ratios > Flashcards

Flashcards in Income Statement Ratios Deck (10)
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1
Q

Gross Profit Margin

A

Margin= percentage

Gross Profit Margin= % Gross Profit/ Total Revenue

2
Q

Net Profit Margin

A

margin= percentage

Net Profit Margin= Net Income/ Total Revenues

3
Q

Vertical Common-Size Income Statement Ratios

A

This idea of a vertical common-size income statement ratio is one of commonality to any ratio talking about margins:

***Any Income Statement Account/ Total Revenues= Income Statement common-sized %

4
Q

Fixed Charge Coverage Ratio (SOLVENCY RATIO)*

A

FCCR= [Earnings before interest and taxes + lease payment (sell,admin expenses) ]/ (lease payment + interest payment)}

5
Q

Operating Profit Margin

A

Margin means percentage**

operating profit margin = operating profit/ revenue

6
Q

Pretax Margin

A

Margin means percentage**

Income before Taxes= (EBIT- Interest Expense)

Pretax Margin= Income before taxes/Revenue

7
Q

CV Sales Ratio Margin (Horizontal Common Income S.)

HINT: Has to do with SD

A

It’s the fact that you are looking at the ‘risk’ for a default in the sales, operating income, net income, and interest coverage

Why? Some companies are very volatile in its sales. This could be due to the fact that there is a switch in demand for the product. ( gas-> electric; 3g-4g switch; phone market)

CV Sales Ratio margin= SD of sales revenue/ mean sales revenue

8
Q

CV Operating Income Ratio (Horizontal Common Income S.)

HINT: Has to do with SD

A

CV Operating Income Ratio= (SD of Operating Income)/ (mean of all the operating incomes)

9
Q

CV Net Income Ratio (Horizontal Common Income S.)

HINT: Has to do with SD

A

CV Net Income Ratio= (SD of Net Income)/ (mean of net income)

10
Q

Interest Coverage Ratio

A

Interest Coverage Ratio= EBIT/ INTEREST

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