Exam 2 Equations Flashcards
Retention Ratio Formula
Addition to retained earnings/ net income
Dividend Payout Ratio Formula
Cash dividends/ Net income
Price-Earnings (PE) Ratio Formula
Price per share/ Earnings per share
Price-Sales Ratio Formula
Price per share/ Sales per share
Return on Assets Formula
Net income/ Total assets
Return on Equity Formula
Net income/ Total equity
Net Profit Margin (NPM) Formula
Net Income/ Sales
Average Collections Period
Accounts Receivable/ Average Daily Sale
The average days’ sales in inventory
365 days/ Inventory turnover
The receivables turnover ratio Formula
Sales/ Accounts receivable
The quick (or acid-test) ratio
Current assets - Inventory/ Current liabilities
The current ratio
Current assets/ Current liabilities
The DuPont identity (ROE)
= ROA * Assets/ Total Equity
= Net income/ Sales * Sales/ Assets * Assets/ Total
= Profit margin * Total asset turnover * Equity multiplier
Equity Multiplier
Total assets/Total equity
PEG Ratio
PE Ratio/ Future Growth Rate
