Ratios

Question 1

Asset turnover (AT)

Answer 1

sales / average total assets

Question 2

Accounts receivable turnover

Answer 2

sales / average accounts receivable

Question 3

Inventory turnover

Answer 3

COGS / average inventory

Question 4

Property, plant, and equipment turnover

Answer 4

sales / average PP&E

Question 5

Current ratio

Answer 5

current assets / current liabilities

Question 6

Quick ratio

Answer 6

cash + short-term securities + accounts receivable / current liabilities

Question 7

Operating cash flow to current liabilities

Answer 7

operating cash flow / average current liabilities

Question 8

Times interest earned

Answer 8

earnings before interest expense and taxes / interest expense

Question 9

Debt-to-equity

Answer 9

total liabilities / total stockholders’ equity

Question 10

Return on equity

Answer 10

net income / average stockholders’ equity

Question 11

Earnings without interest expense

Answer 11

net income + [interest expense * (1 - tax rate)]

Question 12

Return on assets

Answer 12

earnings without interest expense / average total assets

Question 13

Return on financial leverage

Answer 13

ROE - ROA

Question 14

Profit margin

Answer 14

earnings without interest expense / sales revenue

Question 15

Gross profit margin

Answer 15

sales revenue - cogs / sales revenue

Question 16

Expense-to-sales

Answer 16

individual expense items / sales

Question 17

Operating cash flow to current liabilities

Answer 17

operating cash flow / average current liabilities

Question 18

Operating cash flow to capital expenditures

Answer 18

operating cash flow / annual capital expenditures

Question 19

Free cash flow

Answer 19

operating cash flow - net capital expenditures

Question 20

Net operating profit after taxes (NOPAT)

Answer 20

Net income - [(Nonoperating revenues - Nonoperating expense) x (1 - Statutory tax rate)]

Question 21

Return on net operating assets (RNOA)

Answer 21

NOPAT / Average net operating assets

Question 22

Accounts receivable turnover

Answer 22

Sales revenue / Average accounts receivable

Question 23

Net operating profit margin (NOPM)

Answer 23

Net operating profit and taxes (NOPAT) / Sales revenue

Question 24

Average collection period (ACP)

Answer 24

Average accounts receivable / Average daily sales = 365 / ART

Question 25

Return on capital employed

Answer 25

Income from operations before taxes / Average net operating assets

Question 26

Du Pont Theorem

Answer 26

PM x AT x Leverage

NI/Sales x Sales/Avg Assets x Avg Assets/Avg Equity