Financial Ratios and Measures

Question 1

Current Ratio

Answer 1

Current Assets / Current Liabilities

Question 2

Quick (acid test) ratio

Answer 2

(cash + cash equivalents + AR + marketable securities) / Current Liabilities) OR (Current Assets - Inventory) / Current Liabilities

Question 3

Receivables turnover

Answer 3

Net receivable sales / Average receivables

Question 4

Days sales outstading

Answer 4

365 / Receivables turnover

Question 5

Inventory turnover

Answer 5

COGS / Average inventory

Question 6

Days in inventory

Answer 6

365 / Inventory Turnover

Question 7

Payables turnover

Answer 7

Credit purchases / Average payables

Question 8

Days payables outstanding

Answer 8

365 / Payables turnover

Question 9

Cash collection cycle

Answer 9

days in inventory + Days sales outstanding - Days payables outstanding

Question 10

Total debt-to-equity

Answer 10

total liabilities / shareholders equity

Question 11

long-term debt-to-equity

Answer 11

long-term debt / shareholders equity

Question 12

total debt-to-capital

Answer 12

total liabilities / (total debt + common stock + preferred stock)

Question 13

long-term debt to capital

Answer 13

long-term debt / (long-term debt + common stock + preferred stock)

Question 14

EPS

Answer 14

(Net Income - preferred stock dividends) / weighted average shares outstanding

Question 15

Earnings yield

Answer 15

EPS / Current share price

Question 16

Free cash flow yield

Answer 16

Free cash flow per share / current market price share

Question 17

Asset turnover

Answer 17

Sales / Average assets

Question 18

Equity turnover

Answer 18

Sales / Average Equity

Question 19

Gross margin

Answer 19

(Sales - COGS) / Sales

Question 20

Operating Margin

Answer 20

Operating income / Sales

Question 21

Pretax Margin

Answer 21

EBT / Sales

Question 22

Net Margin

Answer 22

Net Income / Sales

Question 23

ROA

Answer 23

Net Income / Average assets

Question 24

ROE

Answer 24

Net Income / Average shareholders’ equity

Question 25

ROIC

Answer 25

EBIT x (1 - marginal tax rate) / invested capital

Question 26

Interest coverage ratio

Answer 26

EBIT / Interest Expense

Question 27

Debt to EBITDA

Answer 27

debt / EBITDA

Question 28

Net debt to EBITDA

Answer 28

(debt - cash and cash equivalents) / EBITDA

Question 29

Enterprise Value

Answer 29

Market Cap + Total Debt + Capital leases + minority interests - cash and cash equivalents

Question 30

EV to EBITDA

Answer 30

Enterprise value / EBITDA

Question 31

CAGR

Answer 31

((Ending value / Beginning value) ^1/# of years) -1

Question 32

Dividend payout ratio

Answer 32

Annual dividends paid / Net income

Question 33

Dividend Yield

Answer 33

Annual dividends paid / Price per share

Question 34

P/E

Answer 34

Current price / EPS

Question 35

P/CF

Answer 35

(Price per share) / (Operating cash flow per shares outstanding)

Question 36

Price to book

Answer 36

(Price per share) / (stockholders equity per shares outstanding)

Question 37

PEG

Answer 37

(P/E) / Annual EPS growth

Question 38

Future Value

Answer 38

PV((1 + i)^t)

Question 39

PV

Answer 39

FV / ((1 + i)^t)

Question 40

NPV

Answer 40

CF0 + (CF1)/((1+i)^1) + … (CFn)/((1+i)^n)

Question 41

CAPM

Answer 41

Re = Rf + Beta(Rm-Rf)

Question 42

DDM

Answer 42

P0 = D1 / (k - g)

Question 43

Cost of Preferred Stock

Answer 43

Annual preferred dividends / Price of preferred stock

Question 44

Cost of debt

Answer 44

interest expense / principal

Question 45

After-tax cost of debt

Answer 45

(interest expense / principal recieved) x (1 - marginal tax rate)

Question 46

WACC

Answer 46

wdRd(1 - tax rate) + wpRp + we+Re