Ratios 2 Flashcards
What is profitability index?
PV of future net cash flows (or NPV of project) / Initial investment
What is basic return on investment?
Operating income / Total assets
What is “complicated” return on investment?
(Operating Income / Sales) / (Sales / Average invested capital)
What is return on sales?
Operating income / Sales
What is capital turnover?
Sales / Average invested capital
How do you find Sales if you know capital turnover and invested capital
Multiply them
What does sales / Capital turnover equal?
Average capital
What is imputed rate?
Target return on investment by company
What is residual income?
Operating Income - target return on invested capital
What is return on assets?
Net Income / Average total assets
What is EPS?
(Net income - preferred divs) / common shs outstanding
What is return on common equity?
(Net income - preferred divs) / average common equity
What is price earnings?
Market price of share / EPS
What is economic rate of return on common stock?
(Dividends paid + Change in stock price) / Beginning stock price
What is formula for economic value added?
After tax operating income / Investment * WACC
