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CMA Part II (FINAL FINAL) > Financial Ratio Summary > Flashcards

Financial Ratio Summary Flashcards

1
Q

net working capital ratio

A

net working capital / total assets

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2
Q

degree of financial leverage

A

% change in net income / % change in EBIT

EBIT / EBT

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3
Q

degree of operating leverage

A

% change in EBIT / % change in sales

contribution margin / EBIT

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4
Q

financial leverage ratio (equity multiplier)

A

assets / equity

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5
Q

interest coverage (times interest earned)

A

EBIT / interest expense

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6
Q

ROA

A

net income / average total assets

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7
Q

ROE

A

net income / average equity

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8
Q

market to book ratio

A

current stock price / book value per share

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9
Q

price earnings ratio

A

market price per share / EPS

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10
Q

book value per share

A

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

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11
Q

basic EPS

A

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

number of shares outstanding is weighted by the number of months shares are outstanding

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12
Q

diluted EPS

A

(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

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13
Q

earnings yield

A

EPS / current market price per common share

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14
Q

dividend yield

A

annual dividends per share / market price per share

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15
Q

dividend payout ratio

A

common dividend / earnings available to common shareholders

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16
Q

shareholder return

A

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

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17
Q

DuPont ROA

A

net profit margin x total asset turnover

(net income / sales) x (sales / average total assets)

net income / average total assets

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18
Q

DuPont ROE

A

ROA x financial leverage

(net income / average total assets) x (average total assets / average equity)

net income / average equity

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19
Q

sustainable growth rate

A

(1 - dividend payout ratio) x ROE

20
Q

price elasticity of demand

A

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

21
Q

profitability index

A

pv of future cash flow / initial investment

22
Q

Expected return using CAPM

A

risk free rate + [beta coefficient x (market rate risk - risk free rate)]

23
Q

Annualized cost of not taking a discount

A

[discount % / (1 - discount %)] x [days in year / (total payment period - discount period)]

24
Q

effective interest rate on discounted loan

A

rate / (1 - rate%)

25
Q

working capital turnover

A

sales / working capital

26
Q

Usable funds

A

Amount needed = invoice amount x (1 - discount %)

27
Q

Loan amount on discounted loans

A

Usable funds / (1 - stated rate)

28
Q

Effective rate

A

net interest expense / usable funds

29
Q

loan amount on loans with compensating balances

A

usable funds / (1-compensating balance %)

30
Q

effective rate with compensating balance

A

stated rate / (1 - compensating balance %)

31
Q

effective rate on discounted loan with compensating balance

A

stated rate / (1 - state rate - compensating balance %)

32
Q

annualized rate of commercial paper

A

[(face value - net proceeds) / Net proceeds] x number of terms per year

33
Q

annual benefit of reducing float

A

(daily cash receipts x days of reduced float) x opportunity cost of funds

34
Q

face amount of a loan with discounted (paid in advance) interest

A

amount needed / (1 - stated rate)

35
Q

cost of capital for preferred stock

A

dividend / (par value - flotation cost)

36
Q

Dividend growth model

A

[last dividend paid x (1 + growth rate)] / (discount rate - dividend growth rate)

37
Q

preferred stock valuation

A

dividend per share / cost of capital

37
Q

component cost of debt

A

effective interest rate x (1 - marginal tax rate)

38
Q

component cost of preferred stock

A

cash dividend on preferred stock / market price of preferred stock

39
Q

component cost of common stock

A

cash dividend on common stock / market price of common stock

40
Q

cost of new debt

A

annual interest / net issue proceeds

41
Q

cost of new preferred stock

A

next dividend / net issue proceeds

42
Q

cost of new common stock

A

[(next dividend / net issue proceeds)] + dividend growth rate

43
Q

increased investment in receivables

A

incremental variable costs x (incremental average collection period / days in year)

44
Q

cost of change in credit terms

A

increased investment in receivables x opportunity cost of funds

45
Q

forward premium or discount

A

[(forward rate - spot rate) / spot rate] x (days in year / days in forward period)

CMA Part II (FINAL FINAL) (1 decks)

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