FAR - Framework, Overview & Statements - Notes to Financial Statements - Ratios - Profitability and Equity

Question 1

What do profitability ratios measure?

Answer 1

Aspects of a firm’s operating (income/loss) results on a relative basis.

Question 2

List the debt ratio formula.

Answer 2

Total Liabilities / Total Assets

Question 3

List the book value per common stock ratio formula.

Answer 3

Common Stockholders’ Equity / # of Outstanding Shares of Common Stock

Question 4

List the Owner’s Equity ratio formula.

Answer 4

Shareholder’s Equity / Total Assets

Question 5

List the book value per preferred share ratio formula.

Answer 5

Preferred shareholder’s equity (including dividends in arrears) / # of outstanding preferred stock

Question 6

List the common stock yield formula.

Answer 6

Dividend per Common Share / Market Price per Common Stock

Question 7

List the debt to equity ratio formula.

Answer 7

Total Liabilities / Total Shareholder’s Equity

Question 8

List the price to earnings ratio formula.

Answer 8

Market price for a common share / Earnings per share (EPS)

Question 9

List the return on total assets formula.

Answer 9

(Net income + Interest Expense (net of tax)) / Average Total Assets

Question 10

List the common stock dividend payout rate formula.

Answer 10

Cash dividends to common shareholders dividend by Net Income to Common Shareholders

Question 11

List the return on common stockholders’ equity formula.

Answer 11

(Net Income - Current period Preferred Dividend Obligation) / Average Common Stockholder’s Equity

Question 12

List the return on owner’s equity formula.

Answer 12

Net Income / Average Stockholder’s Equity

Question 13

List the profit margin formula.

Answer 13

Net Income / Net Sales

Question 14

What do equity/investment leverage ratios measure?

Answer 14

Measure relative sources of equity and equity value.

Question 15

List the per share common stock dividend pay out rate formula.

Answer 15

Cash Dividends per Common Share / EPS