final

Question 1

Gross profit margin + (formule)

Answer 1

Gross profits / Sales = %

Indicates the proportion of sales that a company retains after covering costs directly related to sales;

Question 2

Earnings before interest, tax, depreciation and amortization (EBITDA)

Answer 2

A performance indicator that is not affected by management choices with respect to investment and financing, or by taxation

Question 3

Earnings Before Interest and Taxes (EBIT).

Answer 3

A performance indicator that is not affected by financing choices or taxation

Question 4

Operating margin

Answer 4

Provides information on the % of operational profitability taking into account operating costs only.

Question 5

Net profit margin + (formule)

Answer 5

Net income / Sales = %
Indicates the proportion of sales that turn into profit (management’s ability to make operations profitable);

Question 6

Return on Assets - ROA + (formule)

Answer 6

Net Income / Total assets = %
Indicates the company’s ability to generate results (or profits) from all its assets

Question 7

Asset Turnover + (formule)

Answer 7

Sales / Total Assets
$ of Sales generated by each $ invested in resources

Question 8

Return on Equity - ROE + (formule)

Answer 8

Net income / Shareholder’s equity = %
Indicates the return shareholders on their invested capital.

Question 9

Earnings per share - EPS + (formule)

Answer 9

Net income – Dividends on preferred shares / Weighted average number of common shares outstanding = $

It measures the portion of net income earned by each common share;

Question 10

Diluted earnings per share - EPS + (formule)

Answer 10

Net income – Dividends on preferred shares / Weighted average number of common shares outstanding + common shares issued if dilutive instruments were converted = $

Measures the profit or loss attributable to each share outstanding or that could exist if all holders of dilutive instruments exercised them.

Question 11

Price-to-earnings ratio : P/E + (formule)

Answer 11

Share price / Earnings per share = multiple

Question 12

What is Cash Conversion cycle?

Answer 12

This is the period between the purchase of raw materials (or goods) and the collection of sales revenue.

1) Purchase of raw materials or goods from the supplier
2) Payment of the supplier
3) Sale of goods to the customer
4) Receipt of sums due by the customer

Question 13

Days Accounts Payables Outstanding + (formule)

Answer 13

Accounts payable / Purchases x 365 days = Number of days

Question 14

Accounts Payable Turnover + (formule)

Answer 14

Purchases / Accounts Payable = Number of times
This ratio shows the frequency of payments for purchases during the fiscal year.

Question 15

Days Inventory Outstanding + (formule)

Answer 15

Inventory / Cost of sales x 365 days = Number of days
It represents the number of days between the purchase and sale of inventory (or goods).

Question 16

Inventory Turnover + (formule)

Answer 16

Cost of Sales / Inventory = Number of times
This is the frequency of inventory turnover during the fiscal year.

Question 17

Days Sales Outstanding + (formule)

Answer 17

Accounts receivable / Revenues x 365 days = Number of days

It represents the number of days between the sale of inventory (or goods) and the receipt of money due from the customer.

Question 18

Recevables turnover + (formule)

Answer 18

Revenues / Accounts Receivable = Number of times
This ratio calculates the frequency of sales collection during a fiscal year

Question 19

Inventory Conversion Cycle:

Answer 19

Days Inventory Outstanding + Days Sales Outstanding
Example = (Days Inventory Outstanding) 40 days + Days Sales Outstanding 30 days = 70 days
So there is a delay of 70 days between the receipt (or end of production) of inventory and its transformation into cash.

Question 20

Cash Conversion Cycle

Answer 20

Time to sell inventory + Customer collection time - Days Payable Outstanding

Example = (Days Inventory Outstanding) 40 days + Days Sales Outstanding 30 days = 70 days
Days Payable Outstanding = 45 days
Cash Conversion Cycle = Inventory Conversion Cycle - Days Payable Outstanding = 70-45 = 25 days

Question 21

Asset Turnover + (formule)

Answer 21

Revenues / Total Assets = Number of times
This ratio indicates what each dollar invested in the Assets generates in dollars of Sales

Question 22

Current ratio + (formule)

Answer 22

Current asset / Current liability
Does the company have enough current resources to cover its current liabilities?

Question 23

Quick ratio + (formule)

Answer 23

(Cash + Current Investments + Accounts Receivable) /Current liability
Does the company have enough short-term resources without having to sell inventory to meet its short-term obligations?

Question 24

Acid Test (Cash Ratio) + (formule)

Answer 24

(Cash and cash equivalents + Current Investments) / Current liability
Does the company have enough short-term resources without having to sell inventory and collect trade receivables to cover its short-term liabilities?

Question 25

Indebtedness ratios + (formule)

Answer 25

Total interest-bearing liabilities / Total Assets = %

Interest-bearing liabilities include types of debt on which interest is calculated (e.g., bank loans, mortgages, etc.)

This ratio can be calculated by considering only interest-bearing liabilities, since there are several items within liabilities that do not constitute debt financing.

Question 26

Long-term Debt to Equity Ratio + (formule)

Answer 26

Long-term Debt / Equity = multiple

Question 27

Statement of Cash Flow
There are two methods for preparing and presenting the Statement.
Indirect method

Answer 27

It requires adjusting net income by removing all items included in the calculation of net income that do not affect the company’s cash flow. Then, the changes in the company’s working capital are added back in. This is the method used by most public companies

Question 28

Statement of Cash Flow
There are two methods for preparing and presenting the Statement.
Direct method

Answer 28

It requires converting revenues into receipts and expenses into disbursements.

Question 29

Overview of the Statement of Cash Flow
Cash flows from operating activities

Answer 29

include the sale and purchase (or production) of goods and services, including cash collected from customers, payment to suppliers or employees and payment of items such as rent, taxes and interest

Question 30

Overview of the Statement of Cash Flow
Cash flows from investing activities

Answer 30

Show cash effects of all transactions involving long-term assets (fixed assets, long-term investments, etc.).
Examples: acquisitions of fixed assets, disposals of fixed assets, sales of long-term investments

Question 31

Overview of the Statement of Cash Flow
Cash flow from financing activities

Answer 31

Show cash effects of all transactions involving shareholders or creditors.
Examples: share issues, loan repayments
Dividends paid and interest paid