Flashcards in Securities Analysis Deck (33):

1

## Basic balance sheet equation

### Total Assets = Total Liabilities + Stockholders Equity

2

## What's Capital Surplus?

### Amount paid by shareholders above par value for shares (aka paid-in capital or paid-in surplus)

3

## Four components of stockholders equity?

###
1. Preferred stock

2. Common stock

3. Capital surplus

4. Retained earnings

4

## What's effect of declaring and paying a cash dividend?

###
Declaring: retained earnings reduce and current liabilities increase (reducing net working capital)

Paying: cash and current liabilities reduce in equal amount. No effect on net working capital.

5

## What's the effect of a stock dividend?

### Only affects stockholders equity part of b/s: number of common increases, retained earnings decreases and capital surplus may be adjusted

6

## Net working capital?

### Total current assets MINUS total current liabilities

7

## Current ratio?

### Total current assets DIVIDED BY total current liabilities

8

## Quick assets?

### Current assets MINUS inventories

9

## Acid test ratio?

###
Aka Quick Assets Ratio:

Quick assets DIVIDED BY total current liabilities

10

##
Cash assets ratio?

### (Cash PLUS marketable securities) DIVIDED BY total current liabilities

11

## Rank liquidity ratios from most stringent:

###
1. Cash assets ratio

2. Acid test / quick assets ratio

3. Current ratio

12

## How is cash flow calculated?

### Net income / loss PLUS depreciation

13

## Long-term capitalisation?

###
Long term liabilities PLUS

preferred stock PLUS

total value of common stock (par value PLUS capital surplus PLUS retained earnings)

14

## Bond ratio?

###
Value of bonds DIVIDED BY

total long-term capitalisation

15

## Preferred stock ratio?

###
Value of preferred stock DIVIDED BY

total long-term capitalisation

16

## Common stock ratio?

###
(Par value of common stock PLUS capital surplus PLUS retained earnings) DIVIDED BY

total long-term capitalisation

17

## What does highly leveraged mean?

### High percentage of bonds outstanding relative to common and preferred stock

18

## Debt to equity ratio?

### (Bonds PLUS preferred stock) DIVIDED BY (par value of common PLUS capital surplus PLUS retained earnings)

19

## What are coverage ratios?

### Ability to meet obligations to bondholders and preferred stockholders

20

## Bond interest coverage?

### Ebit DIVIDED BY annual bond interest expense

21

## Preferred dividend coverage?

###
Net income DIVIDED BY preferred dividend

(Preferred dividend is par value of preferred MULTIPLIED by % dividend)

22

## Net tangible assets per bond?

###
(Total assets MINUS intangibles MINUS current liabilities) DIVIDED BY number of bonds

(Calculate this as Principal amount of outstanding bonds DIVIDED BY 1000)

23

## Operating profit margin?

### Operating income DIVIDED BY net sales

24

## Net profit margin?

### Net income (after interest and taxes) DIVIDED BY net sales

25

## Book value per share (net tangible asset value)?

###
(Total assets MINUS intangibles MINUS total liabilities MINUS par value of preferred) DIVIDED BY

number of outstanding common shares

26

## Primary EPS?

###
(Net income MINUS preferred dividends) DIVIDED BY

number it outstanding common shares

27

## P/E ratio?

###
Market price DIVIDED BY

earnings per share

28

## Dividend payout ratio?

### Dividend paid on common DIVIDED BY EPS

29

## How is current yield calculated?

### Annual dividend per share DIVIDED BY market price

30

## What's short interest theory?

### Analyses unclosed short positions. Thought to be bullish as covering positions will increase demand for the stock

31

## What's a head and shoulders formation?

### Indication of a reversal. In a head and shoulders top the stock is peaking and vice versa

32

## What are resistance and support levels?

### Levels which define the range within which a stock trades

33