Ratios

Question 1

Current Ratio

Answer 1

Current assets / Current liabilities

Question 2

Quick (Acid Test) Ratio

Answer 2

Current assets - Inventory / Current liabilities

Question 3

Receivables Turnover

Answer 3

Net credit sales / Average net receivables

Question 4

Days’ Sales in Receivables

Answer 4

365,360, or 300 / Receivables Turnover

360 (Banker’s year)
300 (Number of business days)

Question 5

Days’ Sales in Inventory

Answer 5

Average inventory / (COGS/365) or

365,360, or 300 / Inventory Turnover

Question 6

Total asset turnover

Answer 6

Net sales / Avg. Total assets

Question 7

Debt-to-equity Ratio

Answer 7

Total debt / Total equity

Question 8

Times Interest Earned

Answer 8

Net income + Interest expense + Income tax expense / Interest expense

Question 9

COGS Ratio

Answer 9

COGS / Net sales

Question 10

Gross Margin Percentage

Answer 10

Net Sales - COGS / Net sales -OR-

Gross profit margin / Net sales

Question 11

Net Operating Margin Percentage

Answer 11

Operating income / Net sales

Question 12

Return on Equity

Answer 12

Net income / Total equity

Question 13

Working Capital

Answer 13

Current Assets - Current Liabilities

Question 14

Cash Ratio

Answer 14

Cash equivalents + Marketable securities / Current liabilities

Question 15

AR Turnover in days

Answer 15

Average net receivables / (Net credit sales/365) or

365 / Receivable turnover

Question 16

Inventory turnover

Answer 16

COGS / Average inventory

Question 17

Operating cycle

Answer 17

AR turnover in days + Inventory turn over in days

Question 18

Working capital turnover

Answer 18

Sales / Average working capital

Question 19

AP Turnover

Answer 19

COGS / Average AP

Question 20

Days in AP

Answer 20

Avg AP / (COGS/365)

Question 21

Net profit margin

Answer 21

Net income / Net sales

Question 22

Return on Total Assets

Answer 22

Net income / Average total assets -OR-

Net income/Net Sales * Net sales / Avg total sales (Net profit margin * Total asset turnover)

Question 23

Return on Investment

Answer 23

Net income + Interest Expense (1-Tax Rate) / Avg (Long term liabilities + Equity)

Question 24

Return on Common Equity

Answer 24

Net income - Preferred dividends / Avg common equity

Question 25

Operating cash flow per share

Answer 25

Operating cash flow / Common shares outstanding

Question 26

Operating Cash flows

Answer 26

EBIT + Depreciation - Taxes

Earnings Before Interest & Taxes

Question 27

Degree of financial leverage

Answer 27

EBIT / EBT -OR-

Earnings before interest & taxes / Earnings before taxes

Question 28

EPS (Earnings per Share)

Answer 28

Net Income - Preferred dividends / Weighted average # of common shares outstanding

Question 29

Price / earnings Ratio

Answer 29

Market price per share / Diluted earnings per share

Question 30

Dividend Payout Ratio

Answer 30

Dividends per common share / Diluted earnings per share

Question 31

Dividend yield

Answer 31

Dividends per common share / Market price common share

Question 32

Book value per share

Answer 32

Total stockholders’ equity - Preferred stock / # of common shares outstanding

Question 33

Debt ratio

Answer 33

Total liabilities / Total assets

Question 34

Operating cash flow to Total debt

Answer 34

Operating cash flow / Total debt