BEC Unit 2 Module 2 Flashcards
1
Q
Optimal Capital Structure
A
Ratio of Debt to Equity that produces the lowest WACC
2
Q
Growth Formula
A
ROE x Retention
3
Q
Return on Sales (ROS)
A
Income before int. inc., int. exp., and taxes / Sales
4
Q
ROI
A
Net Income / Average invested capital
5
Q
ROA
A
Net Income / Average Total Assets
6
Q
ROE
A
Net Income / Average Total Equity
7
Q
Operating Leverage
A
Degree to which a company uses fixed operating costs rather than variable operating costs
- Greater risk but greater possible returns
- Ratio of fixed costs to variable costs
8
Q
Financial Leverage
A
Use of debt rather than equity
Interest costs are tax deductible
9
Q
Times-Interest-Earned Ratio
A
EBIT / Interest Expense
10
Q
Debt Ratio
A
Total Liab. / Total Assets
11
Q
Debt-to-Equity Ratio
A
Total Liab. / Total Equity
