Ratios Flashcards
Accounting Equation
Assets = Liabilities + Owners Equity
Working Capital Equation
Working Capital = Current Assets - Current Liabilities
Operating Income
Earnings Before Interest and Taxes (EBIT)
Current Ratio
Current Assets/Current Liabilities
Quick Ratio
(Current Assets – Inventory)/Current Liabilities
Average Collection Period
Accounts Receivable/Daily Credit Sales
Accounts Receivable Turnover
Credit Sales/Accounts Receivable
Inventory Turnover
COGS/Inventory
Total Asset Turnover (TAT)
Sales/Total Assets
Fixed Asset Turnover (FAT)
Sales/Fixed Assets
Operating Income Return on Investment (OIROI)
Operating Income/Total Assets
Debt Ratio
Total Debt/Total Assets
Times Interest Earned (TIE)
EBIT/Interest Expense
Return on Assets (ROA)
Net Income/Total Assets
Return on Equity (ROE)
Net Income/Total Equity
Dupont ROE
(Net Income/Sales) x (Sales/Total Assets) x (Total Assets/Equity)
Dupont Terms for ROE
Net Profit Margin x Asset Turnover x Leverage Multiplier
Gross Margin
Gross Profit/Sales
Operating Margin
EBIT/Sales
Net Profit Margin
= Net Income/Sales
Payout Ratio
Dividends/Net Income
Plowback Ratio
∆Retained Earnings/Net Income
External Financing Needed (EFN)
Projected Total Assets - Projected Total Liabilities - Projected Owners’ Equity
Sustainable Growth Rate (SGR)
ROE x (1 - payout ratio)
Perpetuity = Payment/Interest Rate
(Note
Payment/Interest Rate
(Note: Interest rate is calculated as decimal #; match numerator and denominator as quarterly, semiannual, annual, etc.)
Current Yield
Current Yield = Annual Coupon Payment/Current Price
Yield to Maturity (YTM)
Solve for the I/Yr; then translate answer to ANNUAL terms by doubling. (Answer will be on a SEMIANNUAL basis because your calculation is made using a “Factor of Two.”)
