Ratios

Question 1

Net working capital

Answer 1

Current Assets - Current Liabilities

Question 2

Current Ratio

Answer 2

Current Assets/ Current Liabilities

Question 3

Acid Test or Quick Ratio

Answer 3

(Cash + marketable securities + net receivables)/ Current Liabilities

Question 4

Defensive Interval Ratio

Answer 4

(Cash + marketable securities + net receivables) / average daily cash expenditures

Question 5

Debt to Equity

Answer 5

Total Liabilities/ Owners Equity

Question 6

Times interest earned

Answer 6

(Income before taxes and interest charges)/ (interest charges)

Question 7

Times preferred dividends earned

Answer 7

(Net income)/ (annual preferred dividend requirement)

Question 8

Accounts Receivables Turnover

Answer 8

Net credit sales/ average net receivables

Question 9

Number of days sales in average receivables

Answer 9

360/ receivables turnover

Question 10

Inventory turnover

Answer 10

Cost of good sold/ average inventory

Question 11

Return on total assets

Answer 11

(Net income + interest expense ~ net of tax)/ average total assets

Question 12

Number of days supply in average inventory

Answer 12

360/ inventory turnover

Question 13

Length of operating cycle

Answer 13

(Number of days sales in average receivables) + (number of days supply in average inventory)

Question 14

Book value of common share

Answer 14

Common stockholders equity/ number of common shares outstanding

Question 15

Book value of preferred stock

Answer 15

Preferred stockholders equity/ number of preferred stocks outstanding

Question 16

Return on common stockholders equity

Answer 16

(Net income - preferred dividends) / average common stockholders equity

Question 17

Return on stockholders equity

Answer 17

Net income / average stockholders equity

Question 18

Earnings per share

Answer 18

(Net income- preferred dividends) / average number of common shares outstanding

Question 19

Price Earnings Ratio

Answer 19

Market price per common share/ earnings per common shares

Question 20

Dividend Payout Ratio

Answer 20

Cash dividends per common share/ earnings per common share

Question 21

Yield on common stock

Answer 21

Dividends per common share/ market price per common share

Question 22

Average annual accounting income

Answer 22

Annual net cash flows generated

Question 23

Economic value added

Answer 23

Net operating profit after tax

Question 24

Contribution margin

Answer 24

Selling price