Ratios

Question 0

Quick (acid-test) ratio

Answer 0

(Cash + S/T investment securities + net receivables) /

Current liabilities

Question 1

Current ratio

Answer 1

Current assets /

Current liabilities

Question 2

Ratio < 1.0

Effect of equal increase (or decrease) to numerator & denominator

Answer 2

Increase (decrease)

Question 3

Ratio > 1.0

Effect of equal increase (or decrease) to numerator & denominator

Answer 3

Decrease (increase)

Question 4

Ratio = 1.0

Effect of equal increase (or decrease) to numerator & denominator

Answer 4

No effect on either

Question 5

A/R turnover

Answer 5

Net credit sales /

Avg balance in receivables

Question 6

Avg collection period (AKA days’ sales in receivables)

Answer 6

Days in year /

A/R turnover ratio

Question 7

Inventory turnover

Answer 7

COGS /

Avg balance in inventory

Question 8

Days’ sales in inventory

Answer 8

Days in year /

Inventory turnover

Question 9

Operating cycle =

Answer 9

Days’ sales in receivables +

Days’ sales in inventory

Question 10

Total assets turnover

Answer 10

Net total sales /

Avg total assets

Question 11

Fixed assets turnover

Answer 11

Net total sales /

Avg net fixed assets

Question 12

Debt-to-equity

Answer 12

Total liabilities /

Total equity

Question 13

Times-interest-earned

Answer 13

Earnings before interest & taxes /

Interest expense

Question 14

Profit margin on sales

Answer 14

Net income /

Sales

Question 15

Return on assets

Answer 15

Net income /

Avg total assets

Question 16

Return on equity

Answer 16

Net income /

Avg total equity

Question 17

Return on common equity

Answer 17

Net income - preferred dividends /

Avg common equity

Question 18

Basic earnings per share

Answer 18

Income available to common shareholders /

WTD avg C/S O/S

Question 19

Book value per share

Answer 19

Total SHE - preferred equity /

Total O/S shares

Question 20

Price-to-earnings ratio

Answer 20

Price per common share /

Basic EPS