Calculation

Question 1

Return on Equity (ROE)

Answer 1

This metric measures a company’s profitability in relation to shareholders’ equity. It shows how effectively management is using shareholders’ equity to generate profits.

Calculation
Net Income / Average Shareholders’ Equity
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Question 2

Earnings Per Share (EPS)

Answer 2

This metric indicates the portion of a company’s profit that can be attributed to each outstanding share of common stock. It provides an indication of the company’s profitability on a per-share basis.

Calculation
Net income - preferred dividends / Weighted average numbers of common shares outstanding

Question 3

Current ratio

Answer 3

This liquidity metric measures a company’s ability to cover its short-term obligations with its short-term assets. A higher current ratio indicates better short-term financial health.

Calculation
Current assets / current liabilities

Question 4

Asset Turnover Ratio

Answer 4

This metric assesses the efficiency of a company’s use of its assets in generating sales revenue. A higher ratio indicates that the company is using its assets more efficiently to produce sales.

Calculation
Net Sales / Average Total Asset

Question 5

Return on assets

Answer 5

This metric measures a company’s profitability in relation to its total assets. It shows how effectively assets are being used to generate profits.

Calculation
Net income / Average total assets

Question 6

Net Profit Margin

Answer 6

This metric represents the percentage of revenue that exceeds all expenses and represents profit. A higher net profit margin indicates greater profitability.

Calculation
Net Income / Net Sales x 100%