Module 24.5: More Financial Ratios Flashcards
What is the formula for sustainable growth rate?
g = RR x ROE
RR = retention rate
Retention rate = (net income available to common - dividends declared) / net income available to common
or 1 - dividend payout ratio
Dividend payout ratio = dividends declared / net income available to common
Net income per employee and sales per employee are used for which industry?
services and consulting companies
Growth in same-store sales is used in which industry?
restaurant and retail industries to indicate growth without the effects of new locations.
What is the formula for the coefficient variation of sale?
standard deviation of sales / mean sales
What is the formula for coefficient variation of operating income?
standard deviation of operating income / mean operating income
What is the formula for coefficient variation of net income?
standard deviation of net income / mean net income
What is capital adequacy?
refers to the ratio of some dollar measure of the risk, both operational and financial to its equity capital. Common measure is value-at-risk which is an estimate of the dollar size of the loss that a firm will exceed only some specific percent of the time, over a specific period of time.
What is net interest margin?
interest income divided by the firm’s interest earning assets.
What is a business segment?
portion of a larger company that accounts for more than 10% of the company’s revenues, assets, or income and is distinguishable.
What is a geographic segment?
identified when they meet the size criterion given previously and the geographic unit has a business environment that is different from that of other segments.
What is sensitivity analysis, scenario analysis, and simulation?
sensitivity analysis is based on what if questions
scenario analysis is based on specific scenarios
simulation is a technique in which probability distributions for key variables are selected and a computer is used to generate a distribution.
