Financial Ratios

Question 1

Profit

Answer 1

Market Price - Value =
or
Sales Price - COGS =

Question 2

ROR or % Profit

Answer 2

Profit/Investment =

Question 3

Alternate Form of ROR/%Profit

Answer 3

(New Price - Old Price) / Old Price =
or
[(New Price) / (Old Price)] - 1 =

Question 4

Market Capitalization

Answer 4

(Market Price per share) X (Total shares Outstanding) =

Question 5

Enterprise Value

Answer 5

[Market Value of Equity (Mkt Cap)] - (Debt - Cash) =

Question 6

Current Ratio

Answer 6

(Current Assets) / (Current Liabilities) =

Question 7

Quick Ratio (Acid Test)

Answer 7

(Current Assets - Inventories) / (Current Liabilities) =

Question 8

Inventory Turnover Ratio

Answer 8

(COGS) / (Avg. Inventories) =

Question 9

Days Sales Outstanding (DSO)

Answer 9

(Avg. Receivables) / (Annual Sales / 360 days) =
or
[Avg. Receivables (360 days)] / Annual Sales =

Question 10

Receivables Turnover

Answer 10

(Annual Sales) / (Avg. Receivables) =

Question 11

Convert Receivables T/O to DSO:

Answer 11

(360 days) / (Receivables T/O) =

Question 12

Fixed Assets Turnover Ratio

Answer 12

(Sales) / (Ave. Net Fixed Assets) =

Question 13

Total Assets Turnover Ratio

Answer 13

(Sales) / (Ave. Total Assets) =

Question 14

Debt Ratio

Answer 14

(Total Debt / Total Assets) x 100% =

Question 15

Time-Interest Ratio

Answer 15

(EBITDA / Interest Charges) =

EBITDA = Earnings before interest & taxes

Question 16

Fixed Charge Coverage Ratio

Answer 16

(EBITDA + Lease Payments) / (Interest + Lease Pymt + Sinking Fund Pymt)

Question 17

EBIT (Earnings before interest & taxes)

Answer 17

= Operating Income

Question 18

EBT (Earning before Taxes)

Answer 18

= Pretax Income

Question 19

Net Profit Margin

Answer 19

(Net Income / Sales) x 100% =

Question 20

Gross Margin

Answer 20

(Gross Profit / Sales) x 100% =

Question 21

Operating Margin

Answer 21

(Operating Income / Sales) x 100% =

Question 22

BEP (Basic Earning Power)

Answer 22

(Gross Profit / Ave. Total Assets) x 100% =

Question 23

ROA (Return on Total Assets)

Answer 23

(NI / Ave. Total Assets) x 100% =

Question 24

ROE (Return on Common Equity)

Answer 24

(Net Income / Common Equity) x 100% =

Question 25

Price/Earnings Ratio (P/E)

Answer 25

Calculate EPS first:
EPS = (NI available to SH) / (# of Common Shares Outstanding)
P/E = (Market price per share of common stock) / )EPS)