Formulas

Question 0

Days Sales Outstanding

Answer 0

365 / Accounts Receivable Turnover Ratio

Ch 3

Question 1

Accounts Receivable Turnover Ratio

Answer 1

Credit Sales / Accounts Receivable

Ch 3

Question 2

Asset Turnover Ratio

Answer 2

Sales / Total Assets

Ch 3

Question 3

Inventory Turnover Ratio

Answer 3

Cost of Goods Sold / Inventory

Ch 3

Question 4

Working Capital

Answer 4

Current Assets - Current Liabilities

Ch 3

Question 5

Current Ratio

Answer 5

Current Assets / Current Liabilities

Ch 3

Question 6

Acid-Test Ratio

aka Quick Ratio

Answer 6

(Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Ch 3

Question 7

Debt-to-Equity Ratio

Answer 7

Long-term Debt / Shareholders’ Equity

Ch 3

Question 8

Debt-to-Assets Ratio

aka Debt Ratio

Answer 8

Total Liabilities / Total Assets

Ch 3

Question 9

Net Profit Margin

Answer 9

Net Income / Sales

Ch 3

Question 10

Return on Assets ROA

Answer 10

Net Income / Total Assets

Ch 3

Question 11

Return on Equity. ROE

Answer 11

Net Income / Shareholders’ Equity.

Ch 3

Question 12

Equity Multiplier.

Answer 12

Total Assets / Shareholders’ Equity.

Ch 3

Question 13

DuPont Identity.

Answer 13

Net Profit Margin x Asset Turnover x Equity Multiplier.

Assignment 3.

Question 14

Premium-to-Surplus Ratio.

Answer 14

Net Written Premiums / Policyholders’ Surplus.

Assignment 5.

Question 15

Reserves-to-Surplus Ratio.

Answer 15

(Unearned Premium Reserve + Loss and LAE Reserves) / Policyholders’ Surplus.

Assignment 5.

Question 16

Liquidity Ratio.

Answer 16

(Cash + Invested Assets) / (Unearned Premium Reserve + Loss and LAE Reserves).

Assignment 5.

Question 17

Loss Ratio.

Answer 17

(Incurred Losses + LAE) / Earned Premiums.

Assignment 5.

Question 18

Expense Ratio.

Answer 18

Underwriting Expenses / Written Premiums.

Assignment 5.

Question 19

Combined Ratio.

Answer 19

Loss Ratio + Expense Ratio.

Assignment 5.

Question 20

Investment Income Ratio.

Answer 20

Net Investment Income / Earned Premiums.

Assignment 5.

Question 21

Operating Ratio.

Answer 21

Combined Ratio - Investment Income Ratio.

Assignment 5.

Question 22

Investment Yield Ratio.

Answer 22

Net Investment Gain (Loss) / (Total Cash + Invested Assets).

Assignment 5.

Question 23

Return on Policyholders’ Surplus.

Answer 23

Net Income / Policyholders’ Surplus.

Assignment 5.

Question 24

Annual Rate of Return for a Bond.

Answer 24

(Interest + Capital Gain) / Bond price at the beginning of the year.

Assignment 7.

Question 25

Annual Rate of Return for a Stock.

Answer 25

(Dividend + Capital Gain) / Share price at the beginning of the year.

Question 26

Insurance Leverage.

Answer 26

Reserves / Policyholders’ Surplus = (Premiums Written / Policyholders’ Surplus) x (Reserves / Premiums Written).

Assignment 10.