Mid-term.

Question 1

2 parts to ROE

Answer 1

ROA

Equity multiple

Question 2

2 parts for ROA

Answer 2

Profit margin and total asset turnover

Question 3

Ways to get profit margin

Answer 3

Net profit margin, operating profit margin, gross profit margin

Question 4

Two ways to get total asset turnover

Answer 4

DSO an inventory turnover

DSO is receivables turnover

This gives you the inventory and how you get paid for it. It makes sense the total asset turnover is a combination of inventory turnover and receivables turnover

Question 5

Two ways to get the equity multiple under ROD

Answer 5

Short term and long term or liquidity and solvency

Question 6

Aspects of the quiddity

Answer 6

Current ratio a quick ratio. This is shorter term

Question 7

Aspects of solvency

Answer 7

Solvency is another word for debt management. Got to equity debt to assets debt to market value

Other category: earnings to cover interest is times interest earned.

And EBIDTA COVERAGE.

Question 8

Current Ratio

Answer 8

The current ratio is a liquidity ratio that measures whether or not a firm has enough resources

to meet its short-term obligations.

It compares a firm’s current assets to its current liabilities, and is expressed as follows:

Current ratio=
Current Assets/Current Liabilities

Question 9

Quick Ratio

Answer 9

In finance, the acid-test or quick ratio or liquidity ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. It is the ratio between quick or liquid assets and current liabilities.

A normal liquid ratio is considered to be 1:1. A company with a quick ratio of less than 1 cannot currently fully pay back its current liabilities.

This ratio is considered to be much better and reliable as a tool for assessment of liquidity position of firms.

Quick Ratio=
cash&equivalents, marketable securities, and ACCTS REC / current liabilities

Question 10

TIE

Answer 10

Times-Interest-Earned

Times interest earned (TIE) or interest coverage ratio is a measure of a company’s ability to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest payable.

EBIT or EBITDA /
Interest Charges

Interest Charges = Traditionally “charges” refers to interest expense found on the income statement.

Question 11

impact on bond values due to changes in rate of return

Answer 11

if market rate goes above coupon rate, then value goes down