Financial Ratios

Question 1

Current Ratio

Answer 1

Current Assets / Current Liabilities

Question 2

Quick Ratio

Answer 2

(Cash + ST marketable investments + Accounts Receivable) / Current Liabilities

Question 3

Cash Ratio

Answer 3

(Cash + ST marketable investments) / Current Liabilities

Question 4

Defensive Interval Ratio

Answer 4

(Cash + ST marketable investments + Accounts Receivable) / Daily Cash Expenditures

Question 5

Receivables Turnover Ratio

Answer 5

Total Revenue / Average Accounts Receivable

Question 6

Days of Sale Outstanding (DSO)

Answer 6

of days in period / Receivables turnover ratio

Question 7

Inventory Turnover Ratio

Answer 7

COGS / Average Inventory

Question 8

Days of Inventory on Hand

Answer 8

of days in period / Inventory Turnover Ratio

Question 9

Payables Turnover

Answer 9

Purchases / Average Trade Payables

Question 10

of days of payables

Answer 10

of days in period / Payables Turnover Ratio

Question 11

Cash Conversion Cycle (Net Operating Cycle)

Answer 11

Days of Inventory on Hand + Days of Sales Outstanding - # of days of payables

Question 12

Working Capital turnover ratio

Answer 12

Total Revenue / Average working capital

Question 13

Average Working Capital

Answer 13

Current Assets - Current Liabilties

Question 14

Fixed Asset Turnover Ratio

Answer 14

Total Revenue / Average net fixed assets

Question 15

Total Asset Turnover Ratio

Answer 15

Total Revenue / Average Total Assets

Question 16

Gross Profit Margin

Answer 16

Gross Profit / Total Revenue

Question 17

Operating Profit Margin

Answer 17

Operating Profit / Total Revenue

Question 18

Pretax Margin

Answer 18

EBT / Total Revenue

Question 19

Net Profit Margin

Answer 19

Net Income / Total revenue

Question 20

Operating ROA

Answer 20

Operating Income / Average Total Assets

Question 21

ROA

Answer 21

Net Income / Average Total Assets

Question 22

Return on Equity

Answer 22

Net Income / Average Shareholders’ Equity

Question 23

Return on Total Capital

Answer 23

EBIT / (Interest-bearing debt + Shareholders’ Equity)

Question 24

Return on Common Equity

Answer 24

(Net Income - Preferred Dividends) / Average Common Shareholders’ Equity

Question 25

Tax Burden

Answer 25

Net Income / EBT

Question 26

Interest Burden

Answer 26

EBT / EBIT

Question 27

EBIT Margin

Answer 27

EBIT / Total Revenue

Question 28

Financial Leverage Ratio

Answer 28

Average Total Assets / Average Shareholders’ Equity

Question 29

Debt - to- Asset Ratio

Answer 29

Total Debt / Total Assets

Question 30

Debt-to-Equity Ratio

Answer 30

Total Debt / Total Shareholders’ Equity

Question 31

Debt-to-Capital Ratio

Answer 31

Total Debt / (Total Debt + Total Shareholders’ Equity)

Question 32

Interest Coverage Ratio

Answer 32

EBIT / Interest Payments

Question 33

Fixed Charge Coverage Ratio

Answer 33

(EBIT + Lease Payments) / (Interest Payments + Lease Payments)

Question 34

Dividend payout ratio

Answer 34

Common share dividends / Net Income attributable to common shares

Question 35

Retention Rate

Answer 35

= (Net Income attributable to common shares - Common Shares Dividend) / Net Income attributable to Common shares)
= 1 - dividend payout ratio

Question 36

Sustainable Growth Rate

Answer 36

Retention rate * ROE

Question 37

Earnings per share

Answer 37

= (Net income - preferred dividends) / Wtd. Avg. # of ordinary shares outstanding

Question 38

Book value per share

Answer 38

Common Shareholders’ Equity / Total # of Common Shares Outstanding

Question 39

Free Cash Flow to Equity

Answer 39

CF from operations - Investments in Fixed Capital + net borrowing

Question 40

Free Cash Flow to the Firm

Answer 40

CF from operations + [Interest Expense*(1-tax rate)] - Investment in Fixed Capital