FINANCIAL ANALYSIS II

Question 1

DuPont (original)

Answer 1

ROE = (net profit margin)(asset turnover)(leverage ratio)

Question 2

Net profit margin

Answer 2

net income / revenue

Question 3

Asset turnover

Answer 3

revenue / average total assets

Question 4

Leverage ratio

Answer 4

total assets / shareholder’s equity

Question 5

DuPont (extended)

Answer 5

(net income / EBT) * (EBT/EBIT) * (EBIT/revenue) * (revenue / total assets) * (total assets / total equity)

Question 6

Basic EPS

Answer 6

(net income - preferred dividends) / weighted average common stock outstanding

Question 7

Diluted EPS numerator

Answer 7

(net income - preferred dividends) + convertible preferred dividends + (convertible debt interest * (1-tax rate))

Question 8

Diluted EPS denominator

Answer 8

Weighted average shares + shares from conversion + shares from issuable stock options

Question 9

Coefficient of variation of sales

Answer 9

standard deviation of sales / average sales

Question 10

Coefficient of variation operating income

Answer 10

standard deviation of operating income / average operating income

Question 11

Coefficient of variation of net income

Answer 11

standard deviation of net income / average net income

Question 12

Ending inventor

Answer 12

beginning inventory + purchases - COGS

Question 13

DDB depreciation

Answer 13

(2/useful life) * (cost - accumulated depreciation)

Question 14

Straight-line depreciation

Answer 14

(cost - salvage value) / useful life

Question 15

Income tax expense

Answer 15

taxes payable + change in deferred tax liability - change in deferred tax asset

Question 16

Interest expense

Answer 16

(market rate at issue) * balance sheet liability at beginning of period

Question 17

Cash flow to revenue (P)

Answer 17

CFO / net revenue

Question 18

Cash return on assets (P)

Answer 18

CFO / average total assets

Question 19

Cash return on equity (P)

Answer 19

CFO / average total equity

Question 20

Cash-to-income (P)

Answer 20

CFO / operating income

Question 21

Cash flow per share

Answer 21

(CFO - preferred dividends) / weighted average number of common shares

Question 22

Debt coverage (C)

Answer 22

CFO / total debt

Question 23

Interest coverage (C)

Answer 23

EBIT / interest paid

Question 24

Reinvestment (C)

Answer 24

CFO / cash paid for long-term assets

Question 25

Debt payment (C)

Answer 25

CFO / cash long-term debt repayment

Question 26

Dividend payment (C)

Answer 26

CFO / dividends paid

Question 27

Investing and financing (C)

Answer 27

CFO / cash outflows from investing and financing

Question 28

Sustainable growth rate

Answer 28

ROE * retention rate

Question 29

Retention rate

Answer 29

1 - dividend payout ratio

Question 30

Net profit margin (extended for dupont)

Answer 30

(net income / EBT) * (EBT / EBIT) * (EBIT / revenue)