Ratios Flashcards
B/S vs. I/S Ratios
must find average for B/S item (Beginning + Ending)/2
Types of Ratio Measures
liquidity/solvency, operational activity, profitability, equity/investment leverage
Working Capital vs. Working Capital Ratio
Working Capital = CA – CL Working Capital Ratio = CA/CL
Acid Test/Quick Ratio
(Cash + Net Receivables + Marketable Securities) / Current Liabilities (Excludes Inventory!)
Defensive-Interval Ratio
(Cash + Net Receivables + Marketable Securities) / Avg. Daily Cash Expenditures
Average Collection Period
(Days in Year x Avg. A/R) / Credit Sale for Period
Times Interest Earned Ratio
(N/I + Interest Expense + Income Tax Expense) / Interest Expense
Times Preferred Dividends Earned Ratio
N/I / Annual Preferred Dividend Obligation
A/R Turnover
Net Credit Sales / Average Accounts Receivable
Avg. Number of Days Sales in Receivables
365 / A/R Turnover
Inventory Turnover
COGS / Avg. Inventory
Number of Days Supply in Inventory
365 / Inventory Turnover
A/P Turnover
Credit Purchases (or COGS + Ending – Begin Inventory) / Avg. Accounts Payable
Number of Days Purchases in Payables
365 / Accounts Payable Turnover
Capital Turnover
Annual Sales (or Revenue) / Avg. Owner’s Equity
Cash Conversion Cycle
Cash Conversion Cycle = Inventory Conversion + A/R Conversion – A/P Conversion
Operating Cycle
Inventory Conversion + A/R Conversion
Gross Profit vs. Gross Profit Margin
Gross Profit = Sales (or Revenue) – COGSGross Profit Margin = Gross Profit / Net Sales
Net Profit Margin
Net Profit Margin = Net Income / Net Sales
Return on Total Assets/Investments
Net Income + Interest Expense / Avg. Total Assets or Avg. Total Investments
Return on Owner’s Equity
Net Income / Avg. Stockholder’s Equity
Return on C/S Equity
Net Income – Preferred Dividends / Avg. Common Stockholder’s Equity
Residual Income
Residual Income = Net Income – Required Dollar Return
Economic Value Added
Earnings before interest – ((Opportunity Cost) x (L/T Debt + Stockholder’s Equity)
EPS (Basic)
Net Income – Preferred Dividends / Weighted Avg. Number of Shares Outstanding
Price to Earnings Ratio
Market Price for a Common Share / Earnings Per Share
Debt to Equity Ratio
Total Liabilities/Total Shareholder’s Equity
Owner’s Equity Ratio
Shareholder’s Equity / Total Assets
Debt Ratio
Total Liabilities / Total Assets
