Ratios

Question 1

What is working capital?

Answer 1

Current assets - current liabilities

Liquidity ratios

Question 2

Current ratio?

Answer 2

Current assets / Current liabilities

Liquidity ratios

Question 3

Acid test ratio ?

Answer 3

(Cash equivalents + marketable securities + net receivables) / current liabilities.
Liquidity ratios

Question 4

Cash ratio?

Answer 4

(Cash equivalents + marketable securities) / current liabilities.
Liquidity ratios

Question 5

Accounts receivable turnover?

Answer 5

Net credit sales / avg. net receivables.

Activity ratio

Question 6

Acct. Rec. T.O in days?

Answer 6

Avg. Receivables / (net credit sales /365). OR
365/receivable turnover.
Activity ratio

Question 7

Inventory turnover?

Answer 7

COGS / Avg. Net inventory

Activity ratio

Question 8

Inventory in days?

Answer 8

Avg inventory / (Cogs/365)
OR 365/ inventory turnover.
Activity ratio

Question 9

Operating cycle?

Answer 9

Inventory turnover in days + Receivable turnover in days.

Activity ratio

Question 10

Working capital turnover?

Answer 10

Sales / Avg. working capital

Activity ratio

Question 11

Total asset turnover

Answer 11

Sales / Avg. total assets

Activity ratio

Question 12

Net profit margin?

Answer 12

Net income / Net sales

Profitability ratio

Question 13

Return on total assets?

Answer 13

Net income / Average total assets

Question 14

DuPont return on assets?

Answer 14

Net profit margin ( Net income / Net sales) x total asset turnover (Net sales / Avg. assets).
Profitability ratio

Question 15

Return on investment?

Answer 15

(Net income + interest expense [1-tax]) / Avg. (liabilities+ equity)
Profitability ratio

Question 16

Return on common Equity?

Answer 16

(Net income - Preferred dividends) / Average common equity.

Profitability ratio

Question 17

Debt to equity ratio?

Answer 17

Total liabilities / common stockholders equity.

Long term debt paying ability

Question 18

Debt ratio?

Answer 18

Total liabilities / total assets.

Long term debt paying ability

Question 19

Times interest earned?

Answer 19

Recurring income before taxes and interest / interest

Long term debt paying ability

Question 20

Operating cash flow and total debt?

Answer 20

Operating cash flow / total debt.

Long term debt paying ability

Question 21

How do you calculate the COGS?

Answer 21

COGS = 
Beg inventory 
\+ purchases  
= cost of goods available for sale 
- ending inventory 
= COGS

Question 22

What is the primary purpose for a Quasi reorganization?

Answer 22

This is to eliminate the deficit in the retained earnings.