Financial Analysis Techniques Flashcards
The Operating income/Average total assets ratio shown above is one of many
versions of the __________.
return on assets (ROA) ratio
Net income divided by average shareholders’ equity
return on equity (ROE)
What is TTM? MRQ?
Trailing 12 months
TTM) and most recent quarter (MRQ
________ measure how efficiently a company performs dayto- day tasks, such as the collection of receivables and management
of inventory
Activity ratios
Inventory turnover
Cost of sales or cost of
goods sold / Average inventory
Days of inventory on hand
DOH
Number of days in
period / Inventory turnover
Receivables turnover
Revenue / Average receivables
Days of sales outstanding
DSO
Number of days in
period / Receivables turnover
Payables turnover
Purchases / Average trade payables
Number of days of payables
Number of days in
period /
period
Payables turnover
Working capital turnover
Revenue / Average working capital
Fixed asset turnover
Revenue / Average net fixed assets
Total asset turnover
Revenue / Average total assets
Defensive interval ratio
Cash + Short- term marketable investments +
Receivables / Daily cash expenditures
The ___________ , a financial metric not in ratio form, measures the
length of time required for a company to go from cash paid (used in its operations)
to cash received (as a result of its operations).
cash conversion cycle
____________ results from the use of fixed costs in conducting the company’s business.
Operating leverage
Debt- to- capital ratio
Total debt / (Total debt + Total shareholders’
equity)
Interest coverage
EBIT/Interest payments
Fixed charge coverage
(EBIT + Lease
payments) / (Interest payments + Lease payments)
Operating profit margin
Gross profit minus operating
costs / Revenue
Pretax margin
EBT / Revenue
Operating ROA
Operating income / Average total assets
ROA
Net income / Average total assets
Return on total capital
EBIT / Average short- and
long- term debt and
equity
ROE
Net income / Average total equity
Return on common equity
( Net income – Preferred
dividends) / Average common equity
DuPont Analysis:
ROE =
= ROA × Financial Leverage
= Net profit margin × Total asset turnover × Leverage
Dividend payout ratio
Common share
dividends / Net income attributable to
common shares
Retention rate (b)
(Net income attributable
to common shares – Common share
dividends) / Net income attributable to
common shares
Sustainable growth rate
b × ROE
When calculating business risk ratios, what is Coefficient of variation?
The standard deviation
Capital adequacy ratio —banks
Various components of
capital / Various measures such as risk- weighted assets, market risk exposure, or level of operational risk
assumed
Monetary reserve requirement (Cash reserve ratio)
Reserves held at central
bank/Specified deposit liabilities
Liquid asset requirement
Approved “readily marketable” securities/Specified deposit liabilities
Net interest margin
Net interest income/ Total interest- earning
assets
Average daily rate
Room revenue / Number of rooms sold
FFO =
funds from operations, defined as EBITDA minus net interest expense minus current tax
expense (plus or minus all applicable adjustments).
Free operating cash flow to
debt
CFOd (adjusted)
minus capital
expenditures / Total debt
Return on capital
EBIT / Average beginning- of- year and
end- of- year capital
