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Corp Finance > Ratios > Flashcards

Ratios Flashcards

To understand and memorize ratios

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1
Q

Return on Assets

A

EBIT/Total Assets

For every dollar you have in assets they are making a return of __%

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2
Q

Return on Equity

A

Net Income/Equity (This is what will change with interest rates)

For every dollar you have in equity you are making __% return on it

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3
Q

Financial Leverage

A

If ROA is the same as ROE is means either two things.

1) The Company has no debt
2) The interest rate is the same as the ROA

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4
Q

Positive financial leverage

A

The ability to be able to borrow greater amount of money because you are, as of now, borrowing money at a lower interest rate than what you are earning back on the money you borrowed (your liabilities are working for you)

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5
Q

Negative Financial Leverage

A

When the interest rate at which you are currently borrowing is lower than what you are making back on the money you borrow (your liabilities are working against you and not pulling their weight)

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6
Q

Dividend payout ratio

A

Dividends/Net Income

For every dollar you have in net income you are paying out $XXX in dividends (This is 100%-retention ratio)

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7
Q

Retention Ratio

A

Addition to Retained Earnings/Net Income

For every dollar you earn in net income you are adding $XXX to RE (This is 100%-dividend payout ratio)

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8
Q

AVG Tax Rate

A

Amount taxed/Taxable Income

This shows avg tax rate over different tiered tax rates

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9
Q

Marginal tax rate

A

The tax rate of one additional dollar, also states what is your highest tax bracket

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10
Q

Net Working Capital

A

Current Assets - Current Liabilities

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11
Q

Earnings per share

A

Net Income/Avg shares outstanding

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12
Q

Dividends per share

A

Dividends/Avg shares outstanding

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13
Q

Statement of cash flows

A

1) Operating Activity (inflow/outflow from operations)
2) Investing Activity (Long-term assets PPE etc)
3) Financing Activity (Long-term liabilities N/P etc, long term financing dividends etc)

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14
Q

Current Ratio

A

Current Assets/Current Liabilities

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15
Q

Quick Ratio

A

Current Assets - inventory - prepaid exp etc/Current Liabilities

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16
Q

Cash Ratio

A

Cash/Current Liabilities

17
Q

Inventory Turnover

A

COGS/Avg inventory

18
Q

Days sales in inventory

A

365/inventory turnover

19
Q

receivable turnover

A

sales/A/R

20
Q

Days sales in receivable (avg collections period)

A

365/receivable turnover

21
Q

Fixed Asset Turnover

A

Sales/net fixed assets

22
Q

Total asset Turnover

A

sales/total assets

23
Q

Interval Measure

A

Current Assets/Avg daily operating costs

Says how long you can survive without operating/selling

24
Q

1) Debt Assets Ratio

A

Total Debt/total assets

For every dollar I have in assets, I borrowed $xx

25
Q

2) Debt to equity Ratio

A

total debt/total equity

For every dollar the owners put up, they borrowed $xx

26
Q

3) equity Multiplier

A

Total Assets/total equity

For every dollar the owners put up the have $xx in assets

27
Q

4) Times interest Earned

A

EBIT/interest

For every dollar I owe in interest I am earning $xx

28
Q

5) Cash Coverage Ratio

A

EBIT + Depreciation exp/interest

For every dollar I owe in Interest I am generating $xx in CASH

29
Q

Dupont Anylisis

A 
Profit Margin (net Income/Net Sales)
x
Total Asset Turnover (sales/total assets)
=
ROA (Net Income/Total assets)
x
Equity Multiplier (Total Assets/Total Equity)
=
ROE (Net Income/Total Equity)
30
Q

Price-earnings ratio

A

price per share/earnings per share

People are willing to pay XX times earnings per share to buy 1 share, usually between 12-18

31
Q

Earnings per share

A

Net Income/Shares outstanding

32
Q

PEG Ratio

A

Price-earnings ratio/anticipated growth rate

PEG should be between 1-2

33
Q

Capital Intensity ratio

A

total assets/total sales

For every dollar you increase in sales you need $XX to support that increase

34
Q

External Funds Needed (EFN)

A

How much you need to borrow in order to increase you business and support projected sales

35
Q

Internal Growth Rate

A

ROA x Retention ratio/1-(ROA x retention Ratio)

How much you can grow without external financing

36
Q

Sustainable Growth Rate

A

ROE x retention Ratio/1-(ROE x Retention Ratio)

How much you can grow just by borrowing money and not financing more through equity

Corp Finance (1 decks)

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