Formulas

Question 1

Times Interest Earned

Answer 1

Net Income before interest and taxes / Interest Expense

Question 2

Net Working Capital

Answer 2

Current Assets - Current Liabilities

Question 3

Current Ratio

Answer 3

Current Assets / Current Liabilities

Question 4

Quick Ratio (Acid-Test Ratio)

Answer 4

(Cash + Marketable Securities + AR) / Current Liabilities

Question 5

Cash Ratio

Answer 5

(Cash + Marketable Securities) / Current Liabilities

Question 6

Current Cash Debt Coverage Ratio

Answer 6

Cash Provided from Operations / Avg Current Liabilities

Question 7

Debt to Equity

Answer 7

Total Liabilities / Total Stockholders’ Equity

Question 8

Long-term Debt to Equity

Answer 8

Long-term Liabilities / Stockholders’ Equity

Question 9

Debt to Total Assets

Answer 9

Total Liabilities / Total Assets

Question 10

Fixed Charge Coverage (Earnings to Fixed Charges Ratio)

Answer 10

(EBIT + Fixed Charges) / (Fixed Charges + Interest Expense)

Question 11

Interest Coverage (Times Interest Earned Ratio)

Answer 11

EBIT / Interest Expense

Question 12

Free Cash Flow

Answer 12

Cash Provided by Operations

• Capital Expenditures
• Cash Dividends

Question 13

Degree of Operating Leverage (DOL)

Answer 13

% Change in EBIT / % in Sales

or

Contribution Margin / EBIT

Question 14

Degree of Financial Leverage (DFL)

Answer 14

% Change in Net Income / % Change in EBIT

or

EBIT / EBT

Question 15

Degree of Total Leverage

Answer 15

DOL x DFL

Question 16

Inventory Turnover Ratio

Answer 16

COGS / Avg Inventory

Question 17

Days Sales in Inventory

Answer 17

365 Days / Inventory Turnover

or

Avg Inv / (COGS / 365)

Question 18

AR Turnover Ratio

Answer 18

Credit Sales / Avg Gross AR

Question 19

Days Sales in Receivables

Answer 19

365 Days / AR Turnover

or

Avg Gross AR / (Credit Sales / 365)

Question 20

AP Turnover Ratio

Answer 20

Credit Purchases / Avg AP

Question 21

Days Purchases in AP

Answer 21

365 days / AP Turnover

or

Avg AP / (Credit Purchases / 365)

Question 22

Operating Cycle

Answer 22

Days Sales in AR + Days Sales in Inventory

Question 23

Cash Cycle

Answer 23

Days Sales in AR + Days Sales in Inventory - Days Purchases in AP

or

Operating Cycle - Days Purchases in AP

Question 24

Asset Turnover

Answer 24

Net Sales / Avg Total Assets

Question 25

Fixed Asset Turnover

Answer 25

Net Sales / Avg Net PPE

Question 26

Gross Margin

Answer 26

Gross Profit / Net Sales

Question 27

Operating Profit Margin

Answer 27

Operating Income / Net Sales

Question 28

Profit Margin

Answer 28

Net Income / Net Sales

Question 29

Earnings before Interest, Taxes, Depr, & Amort Margin | EBITDA

Answer 29

EBITDA / Net Sales

Question 30

Return on Assets

Answer 30

Net Income / Avg Total Assets

Question 31

Return on Equity

Answer 31

(Net Income - Preferred Dividends) / Avg Common Stockholders' Equity

Question 32

Market/Book Ratio

Answer 32

Stock Price / Book Value per Share

Question 33

Price/Earnings Ratio (P/E)

Answer 33

Stock Price / Earnings per Share

Question 34

Earnings Per Share (EPS)

Answer 34

(Net Income - Preferred Dividends) / Weighted Avg Common Shares Outstanding

Question 35

Diluted EPS

Answer 35

(Net Income - Preferred Dividends) / Diluted Weighted Avg Common Shares Outstanding

Question 36

Earnings Yield

Answer 36

EPS / Market Price per Share

Question 37

Dividend Yield

Answer 37

Dividend per share / Market Price per Share

Question 38

Dividend Payout Ratio

Answer 38

Dividends / Earnings

Question 39

DuPont Model of ROA

Answer 39

(Net Income / Sales) x (Sales / Avg Total Assets) or Net Profit Margin x Total Asset Turnover

Question 40

DuPont Model on ROE

Answer 40

(Net Income / Avg Total Assets) x (Avg Total Assets / Avg Common Shareholders' Equity) or ROA x Financial Leverage *Financial Leverage = Assets / Equity

Question 41

Sustainable Growth Rate (SGR)

Answer 41

ROE x (1 - Dividend Payout Ratio)

Question 42

Accounting Profit

Answer 42

Accounting Revenues - Accounting Expenses

Question 43

Rate of Return

Answer 43

(Capital Appreciation + Income) / Investment or [(Investmentt+1−Investmentt)+Income]÷Investmentt

Question 44

Average Collection Period

Answer 44

Weighted Avg of times people pay

Question 45

Average Balance in Receivables

Answer 45

Avg Daily Sales x Avg Collection Period

Question 46

Formula to calculate not taking a discount

Answer 46

[(Discount %) / (100% - Discount %) x (Days in Year)] / (Total Payment Period - Discount Period)

Question 47

Margin of Safety

Answer 47

Current Sales - Breakeven Sales or Margin of Safety / Current Sales = Margin of Safety %

Question 48

Contribution Margin

Answer 48

Total Sales - Variable Costs

Question 49

Standard Deviation:Expected Return Ratio

Answer 49

(Standard Deviation/Expected Return):(Expected Return/Expected Return)

Question 50

Coefficient of Variation

Answer 50

Standard Deviation / Expected Return