Financial Ratios & Variance

Question 1

Working Capital

Answer 1

Current assets - Current Liabilities

Question 2

Current Ratio

Answer 2

Current Assets / Current Liabilities

Question 3

Days Sales in Account Receivable

Answer 3

Ending AR / (net sales/365)

Question 4

Cash Conversion Cycle

Answer 4

Days in Inventory + Days Sales in AR - Days of payables outstanding

Question 5

Debt to Equity

Answer 5

Total Liabilities / Total Equity

Question 6

Total Debt Ratio

Answer 6

Total Liabilities / Total Assets

Question 7

Times Interest Earned (Interest Coverage)

Answer 7

EBIT / Interest Expense

Question 8

Gross Margin

Answer 8

Net Sales - COGS / Net Sales

Question 9

Profit Margin

Answer 9

Net Income / Net Sales

Question 10

ROE

Answer 10

Net Income / Average Total Equity*

*(PY equity + CY equity) / 2

Question 11

ROA

Answer 11

Net Income / Average Total Assets*

*(PY Assets + CY Assets) / 2

Question 12

Direct Materials Price Variance

Answer 12

Actual QTY Purchased x (Actual Price - Standard Price)

Question 13

Direct Materials QTY usage Variance

Answer 13

Standard Price Rate x (Actual QTY used - Standard QTY allowed)

Question 14

Direct Labor Rate Variance

Answer 14

Actual hours worked x (Actual Labor Rate - Standard Labor Rate)

Question 15

Direct Labor efficiency variance

Answer 15

Standard Labor Rate x (Actual hours worked - Standard Hours allowed)