Ratios

Question 1

Sales to operating income

Answer 1

Net Sales / Total operating income

How much is needed to drive $1 in operating income

(Efficiency)

Question 2

Sales to fixed assets (fixed asset turnover)

Answer 2

Total sales / avg. Fixed assets

How efficiently assets are used to generate sales, but only fixed assets

(Efficiency)

Question 3

Capital intensity

Answer 3

Total assets / total sales

How much capital is needed to support $1 in sales

(opposite to asset turnover)
(Efficiency)

Question 4

Asset turnover

Answer 4

Total sales / total assets

How efficiently are assets utilised to generate sales

(Efficiency)

Question 5

What are four efficiency ratios and what do they measure?

Answer 5

Asset Turnover (AT)
Capital Intensity (CI)
Sales to Fixed Assets (SFA)
Sales to Operating Income (SOI)

These ratios measuure how efficiently a business utilises it assets to operat and how asset intensive it is

Question 6

DSI / DIOH

Answer 6

Day sales of inventory / days of inventory on hand

365 / Inventory Turns

intuitive measure of inventory cycles

Question 7

Inventory Turns

Answer 7

Measures supply chain effectivness

COGS / Inventory

Question 8

DSO and Formula

Answer 8

Days sales outstanding

(AR*365) / Sales

Time to collect revenue from customers

Question 9

CAGR

Answer 9

Compound annual growth rate

[(EV/BV)^(1/n)]-1