Profitability and Equity Ratios

Question 1

Profitability Ratios

Answer 1

1. Profit Margin
2. Return on Assets
3. Return on Equity
4. Earnings per Share
5. Price-Earnings

Question 2

Profit Margin

Answer 2

Net Income/Sales

Question 3

Return on Assets

Answer 3

Net Income + after-tax Interest Expense/Average Total Assets

Question 4

Return on Equity

Answer 4

Net Income/Average Common Stockholder’s Equity

Question 5

Earnings per Share

Answer 5

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

Question 6

Price-Earnings

Answer 6

Stock Price per Share/Earnings per Share

Question 7

Debt Equity or Leverage Ratios

Answer 7

1. Debt to Equity
2. Owner’s Equity
3. Debt ratio
4. Book Value per Share

Question 8

Debt to Equity

Answer 8

Total Liabilities/Total Shareholder’s Equity

Question 9

Owner’s Equity

Answer 9

Shareholder’s Equity/Total Assets

Question 10

Debt Ratio

Answer 10

Total Liabilities/Total Assets

Question 11

Book Value per Share

Answer 11

Total Owner’s Equity/Number of Shares Outstanding (issued - required, aka treasury)

Question 12

Tax Rate Calculation

Answer 12

Income Tax Expense/Income Before Tax

Question 13

After-Tax Interest Expense

Answer 13

(100 - Tax Rate) x Interest Expense

Question 14

Dividend Payout Ratio

Answer 14

Common Dividends/Net Income

Question 15

Dividends Declared

Answer 15

(Beginning Retained Earnings - Ending Retained Earnings) - Net Income/Loss