Financial Ratios- Chapter 2

Question 1

Profitability Ratios

Answer 1

Gross Margin, Operating Margin, EBIT Margin, and Net Projfit Margin

shows how profitable a comapny is

Question 2

Liquidity Ratios

Answer 2

-shows the short term prospects of the company

Current Ratio
Quick Ratio
Cash Ratio

Question 3

Working Capital Ratios

Answer 3

Accounts Receivable Days 
Accounts Payable Days 
Inventory Days 
Accounts Receivable turnover 
Accounts Payable turnover 
Inventory Turnover

shows how efficient the company is ], ex. how long do they have inventory on hand

Question 4

Interest Coverage Ratios

Answer 4

EBIT- Earnings before interest and taxes
EBITDA-earings before interest, taxes, depreciation and amortization
EBITDA= EBIT+ depreciation and amortization

shows how well we cover debts/interest?

Question 5

Leverage Ratios

Answer 5

Debt-Equity Ratio, Debt to Capital Ratio, Net Debt, Debt to Enterprise Value

shows how well we handle our debt

Question 6

Valuation Ratios

Answer 6

Price to earnings ratio
Enterprise Value to EBIT
Enterprise Value to Sales

shows the relative value of the company

Question 7

Operating Returns Ratios

Answer 7

Return on Equity, Assets, and Invested Capital

-shows how well the company operates?

Question 8

Market Cap

Answer 8

the number of shares outstanding times the price per share

Question 9

Enterprise value

Answer 9

the same thing as the market cap plus al of the net debt or

market value of equity plus debt-cash

Question 10

Dupont Identity

Answer 10

a way to find the ROE of an investment

Net Profit Margin times Asset Turnover times equity multiplier

Question 11

ROE

Answer 11

return value on equity- found by taking the Net Income and dividing it by the Book Value of Equity