Financial Ratio Summary

Question 1

Current ratio

Answer 1

current assets / current liabilities

Question 2

Quick (acid test) ratio

Answer 2

(cash + marketable securities + accounts receivable) / current liabilities

Question 3

Cash ratio

Answer 3

(cash + marketable securities) / current liabilities

Question 4

cash flow ratio

Answer 4

operating cash flow / current liabilities

Question 5

net working capital ratio

Answer 5

net working capital / total assets

Question 6

degree of financial leverage

Answer 6

% change in net income / % change in EBIT

EBIT / EBT

Question 7

degree of operating leverage

Answer 7

% change in EBIT / % change in sales

contribution margin / EBIT

Question 8

financial leverage ratio (equity multiplier)

Answer 8

assets / equity

Question 9

debt to equity ratio

Answer 9

total debt / equity

Question 10

long-term debt to equity ratio

Answer 10

(total debt - current liabilities) / equity

Question 11

debt to total assets ratio

Answer 11

total debt / total assets

Question 12

fixed charge coverage

Answer 12

earnings before fixed charges and taxes / fixed charges

fixed charges include interest, required principal repayment, and leases

Question 13

interest coverage (times interest earned)

Answer 13

EBIT / interest expense

Question 14

cash flow to fixed charges

Answer 14

(cash from operations + fixed charges + tax payments) / fixed charges

Question 15

accounts receivable turnover

Answer 15

credit sales / average gross accounts receivable

Question 16

inventory turnover

Answer 16

cost of goods sold / average inventory

Question 17

accounts payable turnover

Answer 17

credit purchases / average accounts payable

Question 18

days sales in receivables

Answer 18

average accounts receivable / (credit sales / 365)

365 / accounts receivable turnover

Question 19

days sales in inventory

Answer 19

average inventory / (cost of sales / 365)

365 / inventory turnover

Question 20

days purchases in payables

Answer 20

average payables / (purchases / 365)

365 / payables turnover

Question 21

operating cycle

Answer 21

days sales in receivable + days sales in inventory

Question 22

cash cycle

Answer 22

operating cycle - days purchases in payables

Question 23

total asset turnover

Answer 23

sales / average total assets

Question 24

fixed asset turnover

Answer 24

sales / average net property, plant, and equipment

Question 25

gross profit margin percentage

Answer 25

gross profit / sales

Question 26

operating profit margin percentage

Answer 26

operating income / sales

Question 27

net profit margin percentage

Answer 27

Net income / sales

Question 28

EBITDA margin

Answer 28

EBITDA/sales

Question 29

ROA

Answer 29

net income / average total assets

Question 30

ROE

Answer 30

net income / average equity

Question 31

market to book ratio

Answer 31

current stock price / book value per share

Question 32

price earnings ratio

Answer 32

market price per share / EPS

Question 33

book value per share

Answer 33

(total stockholders' equity - preferred equity) / number of common shares outstanding

Question 34

basic EPS

Answer 34

(net income - preferred dividends) / weighted average common shares outstanding number of shares outstanding is weighted by the number of months shares are outstanding

Question 35

diluted EPS

Answer 35

(net income - preferred dividends) / diluted weighted average common shares outstanding Diluted EPS adjusts common shares by adding shares that may be issued for convertible securities and options

Question 36

earnings yield

Answer 36

EPS / current market price per common share

Question 37

dividend yield

Answer 37

annual dividends per share / market price per share

Question 38

dividend payout ratio

Answer 38

common dividend / earnings available to common shareholders

Question 39

shareholder return

Answer 39

(ending stock price - beginning stock price / annual dividends per share) / beginning stock price

Question 40

DuPont ROA

Answer 40

net profit margin x total asset turnover (net income / sales) x (sales / average total assets) net income / average total assets

Question 41

DuPont ROE

Answer 41

ROA x financial leverage (net income / average total assets) x (average total assets / average equity) net income / average equity

Question 42

sustainable growth rate

Answer 42

(1 - dividend payout ratio) x ROE

Question 43

net working capital

Answer 43

current assets - current liabilities

Question 44

breakeven point in units

Answer 44

fixed costs / unit contribution margin

Question 45

breakeven point in dollars

Answer 45

fixed costs / (unit contribution margin / selling price)

Question 46

margin of safety

Answer 46

planned sales - breakeven sales

Question 47

margin of safety ratio

Answer 47

margin of safety / planned sales

Question 48

price elasticity of demand

Answer 48

(change in quantity / average of quantities) / (change in price / average of prices)

Question 49

profitability index

Answer 49

pv of future cash flow / initial investment