Ratios

Question 1

Profitability ratios

Answer 1

Gross margin (GM)
Return on equity (ROE)
Return on assets (ROA)
Profit margin
Asset turnover
FIxed asset turnover

Question 2

Gross margin (GM)

Answer 2

(gross profit / net sales) * 100%

Question 3

Return on equity (ROE)

Answer 3

Net income / end of period SH equity

Question 4

Return on assets (ROA)

Answer 4

Net income + Interest expense (EBIT) / average total assets

Question 5

Profit margin

Answer 5

Net sales / total revenue

Question 6

Fixed asset turnover

Answer 6

Total revenue / end of period fixed assets

Question 7

Liquidity and Solvency

Answer 7

Current ratio
AR turnover
Days AR outstanding
Inventory turnover
Days inventory outstanding
AP turnover
Days AP outstanding
Cash conversion cycle (in days)
Times interest earned
Debt to equity (D/E)

Question 8

Current ratio

Answer 8

Current A / current L

Question 9

AR turnover

Answer 9

net credit sales / end of period trade AR

Question 10

Days AR outstanding

Answer 10

365 / AR turnover

Question 11

Inventory turnover

Answer 11

COGS / end of period inventory

Question 12

Days inventory outstanding

Answer 12

356 / inventory turnover

Question 13

AP turnover

Answer 13

Net credit purchases end of period net trade AP

Question 13

Days AP outstanding

Answer 13

356 / AP turnover

Question 13

Cash conversion cycle (in days)

Answer 13

Days inventory + days AR - days AP

Question 13

Times interest earned

Answer 13

EBIT / interest expense

Question 13

Debt to equity (D/E)

Answer 13

Total L / total SH equity