IX.1 Formulaaaa (performance measures)

Question 1

ROI (return on investments)

Answer 1

Net income / Total Assets

Question 2

Residual Income (RI)

Answer 2

Op Income - (Req rate of return x Invested captial)

Question 3

Economic Value added Important

EVA

Answer 3

Net op profit after tax - weight avg cost of cap x (total assets - current liab)

Question 4

Cash flow ROI

Answer 4

($Flow Op - EconDepr) / Cash invested

Question 5

Gross Margin

Answer 5

Revenue - COGS

(external reporting) DOESNT INCL SGA exps

Question 6

Contribution Margin

Answer 6

Revenue - Variable Costs

planning purposes

Question 7

Op Profit Margin

Answer 7

Op Income / Sales

Question 8

Op income is the SAME as EBIT

Answer 8

Op income = EBIT

Question 9

Profit Margin aka (Return on sales)

Answer 9

Net income / Net sales

Question 10

Return on Equity

Answer 10

NI / Common Stkhld equity

Question 11

Dupont ROI

Answer 11

Return on Sales (ROS) x Asset Turnover
ROS aka Prof Margin = NI / Sales
Cap or Asset Turnover = Sales / Total Assets

Question 12

Residual income (RI)

Answer 12

(Op income - Req Rate return) x Invested capital

Question 13

Receivables Turnover

Answer 13

Sales on Acct / Avg A\R

Question 14

Days sales in receiv. (avg collection period)

Answer 14

Avg A\R / avg sales per day

Question 15

Inventory Turnover

Answer 15

COGS / Avg Inventory

Question 16

Fixed asset turnover

Answer 16

sales / avg net fixed assets

Question 17

Current ratio

Answer 17

Current assets / Current liab

Question 18

Quick/Acid test ratio

Answer 18

(CurAss - Inv) / Curr Liab

Question 19

Debt time interest earned (ability to make regular pmts based on earnings)

Answer 19

Op income / interest exp

Question 20

Price earnings (PE) ratio

Answer 20

mkt price per share / EPS

just remember price TO (over) earnings

Question 21

Book value per share

Answer 21

CmStk owner equity / # outstanding CmStk shares