F2-M8-Ratio and Variance Analysis

Question 1

What is the current ratio formula?

Answer 1

Current ratio = Current assets/Current Liabilities

Question 2

What is the quick ratio formula

Answer 2

Quick Ratio = Cash and Cash equivalents + Short term marketable securities + Receivables (net) / Current Liabilities

Question 3

What is the operating cash flow ratio formula?

Answer 3

Operating cash flow ratio = Cash flow from operations / ending current liabilities

Question 4

How is days in inventory calculated?

Answer 4

Days in inventory = ending inventory / cost of goods sold / 365 days in

Question 5

How is days sales in accounts receivable calculated?

Answer 5

Ending accounts receivables (net) / Sales (net) / 365

Question 6

How is days of payables outstanding calculated?

Answer 6

Days of payables outstanding = Ending accounts payable / cost of goods sold / 365

Question 7

What is the cash conversion cycle formula?

Answer 7

Cash conversion cycle = Days in inventory + days sales in accounts receivable - days of payables outstanding

Question 8

What is the debt-to-equity formula?

Answer 8

Debt-to-equity = Total Liabilities / Total Equity

Question 9

What is the total debt ratio formula?

Answer 9

Total debt ratio = Total liabilities / Total assets

Question 10

What is the times interest earned formula?

Answer 10

Times interest earned ratio = Earning before interest and taxes (EBIT) / Interest expense

or

Income before interest expense and taxes / interest expense

Question 11

How is gross margin calculated?

Answer 11

Gross margin = Sales (net) - cost of goods sold / Sales (net)

Question 12

How is profit margin calculated?

Answer 12

Profit Margin = Net income / sales (net)

Question 13

How is return on equity (ROE) calculated?

Answer 13

ROE = Net income / Average total equity

Question 14

How is return on assets (ROA) calculated?

Answer 14

ROA = Net income / Average total assets