Financial Ratios and Performance Metrics

Question 1

Current Ratio (Liquidity Ratio)

Answer 1

= Current Assets / Current Liabilities

Question 2

Quick Ratio (Acid-Test Ratio) (Liquidity Ratio)

Answer 2

= (Current Assets - Inventory - Prepaids) / Current Liabilities

Question 3

Accounts Receivable Turnover (Liquidity Ratios)

Answer 3

= Net Credit Sales / Average Accounts Receivable

Question 4

Inventory Turnover

Answer 4

= Cost of Goods Sold (COGS) / Average Inventory

Question 5

Accounts Payable Turnover

Answer 5

= Total Supplier Purchase / Average Accounts Payable

Question 6

Debt-to-Equity Ratio (Solvency Ratios)

Answer 6

= Total Liabilities / Shareholder’s Equity

Question 7

Total Debt Ratio (Solvency Ratios)

Answer 7

= (Total Liabilities / Total Assets) x 100

Question 8

Times Interest Earned or Interest Coverage Ratio (Solvency Ratios)

Answer 8

= Earnings Before Interest and Taxes (EBIT) / Interest Expense

Question 9

Gross Profit Margin (Profitability Ratios)

Answer 9

= Gross Profit / Revenue

Question 10

Net Profit Margin (Profitability Ratios)

Answer 10

= Net Income / Revenue

Question 11

Return on Sales (Operating Profit Margin)

Answer 11

= (Operating Profit (Revenue - Operating Expenses) / Revenue) x 100

Question 12

Return on Assets (ROA) (Profitability Ratios)

Answer 12

= Net Income / Total Assets

Question 13

Return on Equity (ROE) (Profitability Ratios)

Answer 13

= Net Income / Shareholder’s Equity

Question 14

Asset Turnover Ratio (Efficiency Ratios)

Answer 14

= Net Sales / Average Total Assets

Question 15

Inventory Turnover Ratio (Efficiency Ratios)

Answer 15

= Cost of Goods Sold / Average Inventory

Question 16

Earnings Per Share (EPS) (Market Value Ratios)

Answer 16

= Net Income / Number of Common Shares Outstanding

Question 17

Price-to-Earnings (P/E) Ratio (Efficiency Ratios)

Answer 17

= Market Price Per Share / Earnings Per Share

Question 18

Dividend Payout Ratio

Answer 18

= (Total Dividends Paid) / Net Income) x 100

Question 19

Operating Cash Flow Ratio (Cash Flow Ratios)

Answer 19

= Operating Cash Flow / Total Debts

Question 20

Free Cash Flow to Equity (FCFE) (Cash Flow Ratios)

Answer 20

= Cash Flow from Operations - Capital Expenditures - Debt Payments + New Debt Issued

Question 21

EBITDA (Performance Metrics)

Answer 21

= Net Income + Interest + Taxes + Depreciation + Amortization

Question 22

Sales Variance

Answer 22

= Actual Sales - Budgeted Sales

Question 23

Volume Variance

Answer 23

= (Actual Units Produced - Budgeted Production Units) x Budgeted Overhead Rate Per Unit

Question 24

Price Variance

Answer 24

= (Actual Unit Cost - Standard Unit Cost) x Actual Quantity Purchased

Question 25

Expense Variance

Answer 25

= Actual Expenses - Budgeted Expenses

Question 26

Profit Variance

Answer 26

= Actual Profit - Budgeted Profit

Question 27

Material Variance

Answer 27

= (Actual Quantity Used x Actual Price) - (Standard Quantity Expected x Expected Price)