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FRA Midterm > RATIOS > Flashcards

RATIOS Flashcards

1
Q

RETURN ON EQUITY (ROE)

A

ROE = NI / Avg. Equity

Measures how much profit the company generates with the money obtained from shareholders.

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2
Q

RETURN ON ASSETS (ROA)

A

ROA = NI / Avg. A

Measures effectiveness of resource utilisation.

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3
Q

GP MARGIN

A

GP MARGIN = GP / Sales

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4
Q

EBITDA MARGIN

A

EBITDA MARGIN = EBITDA / Sales

EBITDA = Sales - COGS - SG&A
Earning before Taxes, Interest, Dep. & Amort.

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5
Q

NET PROFIT MARGIN

A

NP MARGIN = NI / Sales

Measures net profit that is generated from each dollar of sales revenue.

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6
Q

EFFECTIVE TAX RATE (ETR)

A

EFFECTIVE TAX RATE = Income Tax Exp. / EBT

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7
Q

CURRENT RATIO

A

CURRENT RATIO = Current A / Current L

Higher ratios means co. will have less trouble to pay short term liabilities.

Very high can imply inefficient use of cash.

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8
Q

QUICK RATIO

A

QUICK RATIO = (Cash + AR) / Current L

Higher ratios means co. will have less trouble to pay short term liabilities.

Very high can imply inefficient use of cash.

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9
Q

CASH RATIO

A

CASH RATIO = Cash / Current L

Higher ratios means co. will have less trouble to pay short term liabilities.

Very high can imply inefficient use of cash.

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10
Q

TIME INTEREST EARNED (TIE)

A

TIME INTEREST EARNED = EBIT / Interest Exp.

Is a coverage ratio.

Higher ratio means the co. will have less trouble paying its interest exp.

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11
Q

OPERATING CF TO CL

A

OPERATING CF TO CL = Operating CF / Avg. Current L

Higher ratios means co. will have less trouble to pay short term liabilities.

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12
Q

DEBT TO EQUITY (D/E)

A

D/E = Total L / Total E

Measures how much debt the company is suing to finance its assets in relation to the equity.

Higher the ratio, the more leveraged the co. is.

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13
Q

LONG TERM DEBT TO EQUITY (LTD/E)

A

LTD/E = Long Term Debt / Total Equity

Only uses long term debt!!!

Higher the ratio, the more leveraged the co. is.

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14
Q

EQUITY MULTIPLIER (EM)

A

EM = Total A / Total L

Same as D/E ratio.

EM = 1 + D/E = 1 + L/E.

Higher the ratio, the more leveraged the co. is.

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15
Q

TOTAL ASSET TURNOVER

A

TOTAL ASSET TURNOVER = Sales / Avg. Assets

Measures sales generated by each dollar that a co. invests in assets.

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16
Q

PPE TURNOVER (PPET)

A

PPET = Sales / Avg. PPE

Measures amount of PPE needed to generated sales.

17
Q

AR TURNOVER (ART)

A

ART = Sales / Avg. AR

Measures efficiency managing receivables.

18
Q

INVENTORY TURNOVER (IT)

A

IT = COGS / Avg. Inventory

Measures efficiency managing inventory.

19
Q

PAYABLES TURNOVER (PT)

A

PT = COGS / Avg. Acc. Payable

Measures efficiency managing payables.

20
Q

AVG COLLECTION PERIOD (DSO)

A

DSO = 365 / ART

Days Sales Outstanding.

Av.g nº of days the clients take to pay the co.

If co. only accepts cash, DSO = 0

21
Q

AVG INVENTORY PERIOD (DIO)

A

DIO = 365 / IT

Days Inventory Outstanding

Av.g nº of days inventories are held before being sold.

22
Q

AVG PAYMENT PERIOD (DPO)

A

DPO = 365 / PT

Days Payable Outstanding

Av.g nº of days the co. takes to pay its suppliers.

23
Q

CASH CONVERSION CYCLE (CCC)

A

CCC = DIO + DSO - DPO

24
Q

PERCENT DEP.

A

% DEP = Accum. Dep / Acquisition Cost of A

Lower = Newer equipment

25
Q

OCF TO CAPEX

A

OCF TO CAPEX = Operating CF / Annual CAPEX.

CAPEX is the amount spent buying fixed assets.

Higher ratio = Co. is in a better position to acquire fixed assets.

26
Q

EARNING PER SHARE (EPS)

A

EPS = NI / Nº of Outstanding Shares

27
Q

DIVIDEND PER SHARE (DPS)

A

DPS = Dividends / Nº of Shares Outstanding

28
Q

PAYOUT RATIO

A

PAYOUT RATIO = Dividend Per Share (DPS) / Earning Per Share (EPS)

Indicates the % of profits that are being paid out to investors.

Higher = Retaining less profits.

29
Q

DIVIDEND YIELD

A

DIVIDEND YIELD = Dividend Per Share (DPS) / Share Price

Measures the income that a share generated as a % of its current price.

30
Q

PRICE TO EARNINGS RATIO (PER)

A

PER = Share Price / EPS = Market Cap / NI

Compares co. market cap to its earnings.

Low PER = Cheap co. to invest in.

High PER = High growth expectations.

31
Q

BOOK VALUE PER SHARE

A

BOOK VALUE PER SHARE = Total E / Nº of Shares Outstanding

Calculates the value per share using the accounting value of equity.

32
Q

PRICE TO BOOK

A

PRICE TO BOOK = Share Price / Book Value Per Share

Compares market cap to book value of equity.

FRA Midterm (10 decks)

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