Module 1

Question 1

Components of ROA

Answer 1

Operating profit margin

asset turnover

Question 2

Components of ROCE

Answer 2

ROA
Common earnings leverage
Financial structure leverage

Question 3

Short term liquidity types

Answer 3

liquidity ratios

activity ratios

Question 4

liquidity ratios

Answer 4

current ratio

quick ratio

Question 5

activity ratos

Answer 5

AR turnover
Inv turnover
AP turnover

Question 6

Days in _____

Answer 6

365/______

Question 7

long term solvency types

Answer 7

debt ratios

coverage ratios

Question 8

debt ratios

Answer 8

long term debt to assets

long term debt to equity

Question 9

coverage ratios

Answer 9

interest coverage

cash flow coverage

Question 10

ROA=

Answer 10

NOPAT/AVG assets

Question 11

NOPAT

Answer 11

NI+(Interest Exp*(1-TR))

Question 12

Operating profit margin=

Answer 12

NOPAT/sales

Question 13

Asset turnover=

Answer 13

Sales/ avg assets

Question 14

ROA =(simple)

Answer 14

operating profit margin * asset turnover

Question 15

Roa ignores_____

Answer 15

capital structure

Question 16

nopat is synnonymous with…

Answer 16

EBI

Question 17

ROCE=

Answer 17

NI - Pref div - interest exp- nonrecurring items
__________________________________
avg common sh equity

avg common sh equity ==> total equity-ps

Question 18

ROA=

Answer 18

NOPAT/avg assets

Question 19

common reanings leverage=

Answer 19

NI - pref div/ NOPAT

Question 20

Financial structure leverage

Answer 20

avg assets/avg common sh equity

Question 21

common earnings leverage measures

Answer 21

% of NOPAT that goes to common SH. X<=1

Question 22

financial structure leverage means

Answer 22

measure of the amount of debt in the capital structure

x>=1

Question 23

return analysis==>

Answer 23

ROA&ROCE& their relationship with the common shareholders

Question 24

Current ratio=

Answer 24

CA/CL

Question 25

Quick ratio=

Answer 25

Cash+market securities+Receivables/ CL

Question 26

AR turnover=

Answer 26

net sales/avg AR

Question 27

inventory turnover

Answer 27

cgs/avg inventory

Question 28

AP turnover=

Answer 28

Inventory purchases/ avg AP

Question 29

purchases=

Answer 29

cgs+EI-BI

Question 30

cash conversion cycle=

Answer 30

days in inventory+days in AR - days in AP

Question 31

long term debt to assets=

Answer 31

long term debt / total assets

Question 32

long term debt to equity=

Answer 32

long term debt/ total equity

Question 33

interest coverage=

Answer 33

earnings before taxes and interest/ interest expense

Question 34

cash flow coverage=

Answer 34

cash flow from operating activities/ interest expense

Question 35

PE ratio

Answer 35

P0/E0=1/r or P0/E0=1/(r - g)