PART 4 Flashcards
Ratios and Profitability Measures
1
Q
Debt to Equity
A
= Debt/Equity (Financial leverage)
2
Q
Interest Coverage Ratio
A
= EBIT/Interest (<1 Distress, >3 OK)
3
Q
Debt Coverage Ratio
A
= Net Debt/EBITDA (Safe < 2.5 < unsafe)
4
Q
Current Ratio
A
= Current Assets/Current Liabilities
5
Q
Quick Ratio
A
= (Current Assets - Inventories)/Current Liabilities
6
Q
ROE
A
= Net Result / Equity
7
Q
ROCE before tax
A
= EBIT/Invested Capital = (EBIT/Sales) * (Sales/Invested Capital)
8
Q
ROCE after tax
A
= EBIT*(1-tax) / Invested Capital = NOPAT / Invested Capital
ROCE = RONA = ROIC = ROTC = ROOF
