Ratios

Question 1

List the formula for determining Operating Cycle Length.

Answer 1

Days’ Sales in Accounts Receivable + Days’ Supply in Inventory.

Question 2

List the Accounts Receivable Turnover ratio formula.

Answer 2

Net Credit Sales / Average Net Accounts Receivable.

Question 3

List the working capital ratio formula.

Answer 3

Current Assets / Current Liabilities.

Question 4

List the formula for the Acid Test or Quick Ratio.

Answer 4

(Cash + Net Receivables + Marketable Securities) / Current Liabilities.

Question 5

List the cash availability or interval ratio formula.

Answer 5

(Cash + Net Receivables + Marketable Securities) / Average Daily Cash Expenditures.

Question 6

List the formula for inventory turnover.

Answer 6

Cost of Goods Sold (COGS) / Average Inventory.

Question 7

List the formula for times preferred dividend.

Answer 7

Net Income / Annual Preferred Dividend Obligation.

Question 8

List the formula for Number of Days’ Sales in Accounts Receivable (AR).

Answer 8

365/ AR Turnover.

Question 9

List the formula for working capital.

Answer 9

Current Assets - Current Liabilities.

Question 10

List the formula for number of days’ supply in inventory.

Answer 10

365/ Inventory Turnover.

Question 11

List the formula for times interest earned.

Answer 11

(Net Income + Interest Expense + Income Tax Expense) / Interest Expense.

Question 12

List the return on total assets formula.

Answer 12

(Net Income + Interest Expense (net of tax)) / Average Total Assets.

Question 13

List the price to earnings ratio formula.

Answer 13

Market Price for a Common Share / Earnings Per Share (EPS).

Question 14

List the common stock yield formula.

Answer 14

Dividend per Common Share / Market Price per Common Share.

Question 15

List the return on common stockholders’ equity formula.

Answer 15

(Net Income-Current Period Preferred Dividend Obligation) / Average Common Stockholders’ Equity.

Question 16

List the profit margin formula.

Answer 16

Net Income/Net Sales.

Question 17

List the debt to equity ratio formula.

Answer 17

Total Liabilities / Total Shareholders’ Equity.

Question 18

List the book value per preferred share ratio formula.

Answer 18

Preferred Shareholders’ Equity (including dividends in arrears) / Number of Outstanding Preferred Stocks.

Question 19

List the book value per common stock ratio formula.

Answer 19

Common Shareholders’ Equity / Number of Outstanding Common Shares.

Question 20

List the return on owner’s equity formula.

Answer 20

Net Income / Average Stockholders’ Equity.

Question 21

List the total common stock dividend payout rate formula.

Answer 21

Cash Dividends to Common Shareholders / Net Income to Common Shareholders.

Question 22

List the owner’s equity ratio formula.

Answer 22

Shareholders’ Equity / Total Assets.

Question 23

List the per share common stock dividend pay out rate formula.

Answer 23

Cash Dividends per Common Share / Earnings Per Share (EPS).

Question 24

List the debt ratio formula.

Answer 24

Total Liabilities / Total Assets.