Ratios

Question 0

Cash Ratio

Answer 0

(Cash and Equivalents + Marketable securities)
_____________________
Current Liabilities

Question 1

Quick Ratio (Acid Test)

Answer 1

(Cash and equivalents + Marketable securities + Net Receivables)
_____________________
Current Liabilities

*Inventory & Prepaids are not considered in CA

Question 2

Cash Flow Ratio

Answer 2

Cash flow from operations
_____________________
Current Liabilities

• Cash Flow from operation = Operating Cash Flow

Question 3

Net Working Capital Ratio

Answer 3

(Current Assets - Current Liabilities)
___________________
Total Assets

Question 4

Liquidity Index

Answer 4

(Accounts receivable x Days sales in receivables) + (Inventory x Days sales in inventory)
_______________
Cash + Accounts receivable + Inventory

Question 5

Accounts Receivable Turnover

Answer 5

Net credit sales
_______________
Average trade receivables (net)

• Net meaning net off allowances for bad debt

Question 6

Inventory Turnover

Answer 6

Cost of goods sold
_______________
Average inventory

Question 7

Accounts Payable Turnover

Answer 7

Purchases
___________________
Average accounts payable

Question 8

To Convert COG Manufactured to COG Sold

Answer 8

Opening Inventory + Purchases or COGM - Closing Inventory = COGS

Question 9

Days Sales Outstanding (DSO) in receivables (Average Collection period)

Answer 9

365
_______________
Accounts receivable turnover

Question 10

Days Sales in Inventory

Answer 10

365
______________
Inventory turnover

Question 11

Days Purchases in Accounts Payable (DPO)

Answer 11

365
_______________
Accounts payable turnover

Question 12

Fixed Assets Turnover

Answer 12

Net Sales
_______________
Average Net Fixed Assets

Question 13

Total Assets Turnover

Answer 13

Net Sales
_______________
Average Total Assets

Question 14

Liquidity Index

Answer 14

[(A/R * DSO) + (Inventory * Days Sales in Inventory)]
_______________
(Cash + AR + inventory)

Question 15

Times-interest-earned Ratio

Answer 15

EBIT
______________
Interest expense

An income statement approach to evaluation a firm’s ongoing ability to meet the interest payments on its debt obligations.

Question 16

Debt -to-Total Assets Ratio (Debt Ratio)

Answer 16

Total Debts
____________
Total Assets

Question 17

Long-term Debt -to- Equity Capital Ratio (Debt to Equity)

Answer 17

Long Term Debt
_____________
Equity

• Long Term Debt = Total Debt - Current Liabilities

Question 18

Debt -to- Equity Ratio

Answer 18

Total Debt
____________
Equity

Question 19

Total Debt -to- Total Capital Ratio

Answer 19

Total Debt
_________
Total Capital

Question 20

Financial Leverage

Answer 20

Assets
________
Equity

 OR

% ∆ in Net income
____________
% ∆ in EBIT

Question 21

Operating Leverage

Answer 21

Sales
_____

EBIT

 OR

% ∆ EBIT
_________
% ∆ in Sales

Question 22

Residual Income

Answer 22

ROI - imputed return on investment

Question 23

Book Value Per Share

Answer 23

Total Equity - Preferred Equity
______________________
No. of Common Shares outstanding

Question 24

Sustainable Equity Growth Rate

Answer 24

Return on Common Equity * (1 - Divident payout ratio)

Question 25

Dividend Yield

Answer 25

Dividend per Share _______________ Market Price per Share

Question 26

Dividend Payout Ratio

Answer 26

Dividends to Common Shareholders ________________ Income available to Common Shareholders

Question 27

Earnings Yield

Answer 27

Earnings per Share ______________ Market Price per Share

Question 28

Basic Earnings Per Share (BEPS)

Answer 28

Net Income - Preferred Dividend _______________ Weighted Average Number of Common Shares Outstanding

Question 29

Price/EBITDA Ratio

Answer 29

Market Price Per Share __________ EBITDA

Question 30

Price/Earnings Ratio

Answer 30

Market Price Per Share _____________ Earnings Per Share

Question 31

Market/Book Ratio

Answer 31

Market Price Per Share ______________ Book Value Per Share

Question 32

Net Profit Margin

Answer 32

Net Income _________ Net Sales

Question 33

Operating Profit Margin

Answer 33

Operating Income _________ Net Sales

Question 34

Gross Profit Margin

Answer 34

Gross Profit ________ Net Sales

Question 35

Return on Assets ( ROA )

Answer 35

Net Income _______________ Average Total Assets

Question 36

Return on Investment ( ROI )

Answer 36

Net Income __________ Total Assets

Question 37

Return on Equity (ROE)

Answer 37

Net Income ___________ Average Total Equity

Question 38

Return on Common Equity (ROCE)

Answer 38

(Net Income - Preferred Dividends) ____________ Average Common Equity Shares Outstanding

Question 39

DuPont Model

Answer 39

ROA = Net Profit margin * Total Asset Turnover OR ROA = Net Income/Avg Total Assets = Net Income/Sales * Sales / Avg Total Assets

Question 40

Diluted EPS

Answer 40

Net Income - Preferred Dividend + Preferred Div for Converted Shares + Tax Saving on Interest on Converted Bonds ____________ Diluted Weighted Avg no. of Common Shares

Question 41

What is the relation between ROE and Total Assets

Answer 41

``` ROE = Du Pont ROI x Leverage ROE = Net Income / Sales x Sales/Avg Assets x Assets / Equity ``` All being equal ROE will decrease as Total Assets increases

Question 42

What is the relation between ROE and Total Assets

Answer 42

``` ROE = Du Pont ROI x Leverage ROE = Net Income / Sales x Sales/Avg Assets x Assets / Equity ``` All being equal ROE will decrease as Total Assets increases