15- Ratio Analysis

Question 1

What is the Earnings Per Share (EPS) formula?

Answer 1

EPS = Profit available to ordinary shareholders/Number of ordinary shares

Question 2

What is Diluted EPS?

Answer 2

EPS that considers al potentially dilutive instruments in the number of ordinary shares e.g. convertible bonds

Question 3

What is the Price-earnings (PE) ratio formula?

Answer 3

PE ratio = Market price per share/Earnings per share

Question 4

How does prospective PE ratio change the calculation?

Answer 4

Prospective PE ratio uses current financial year’s forecast

Question 5

What is Enterprise Value (EV)?

Answer 5

The market value of equity and debt

Question 6

What is the formula for EBITDA multiple?

Answer 6

EBITDA multiple = EV/EBITDA

Question 7

What is the formula for Dividend yield?

Answer 7

Dividend yield = (Dividend per share/market price per share)x100

Question 8

What is the formula for dividend cover?

Answer 8

Dividend cover = EPS/Dividends per share

Question 9

What is the formula for Payout ratio?

Answer 9

Payout ratio = Dividends per share/EPS
(inverse of dividend cover)

Question 10

What is the formula for Gearing (debt/equity) ratio?

Answer 10

Debt/equity ratio = (Total long-term debt/Total equity) x 100

Question 11

What is the Operational gearing formula?

Answer 11

Operational gearing = Sales revenue-Variable costs/Trading profit

Question 12

What is the Current ratio formula?

Answer 12

Current ratio = Current assets/Current liabilities

Question 13

What is the quick ratio (acid test) formula?

Answer 13

Quick ratio = (Current assets excl.Stock)/Current liabilities

Question 14

What is the Return on capital employed (ROCE) formula?

Answer 14

ROCE = (Operating profit/Capital employed) x 100

Question 15

What is the capital employed formula?

Answer 15

Capital employed = Total assets - Current liabilities

Question 16

What is the Asset turnover equation?

Answer 16

Asset turnover = Revenue/Total assets