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CMA Part 2 > Ratios > Flashcards

Ratios Flashcards

1
Q

Gross profit margin ratio

Profitability

A

Net sales minus COGS

Divided by

Net sales

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2
Q

Operating profit margin

Profitability

A

Operating income

Divided by

Net sales

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3
Q

Net profit margin

Profitability

A

Net income

Divided by

Net sales

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4
Q

EBITDA margin

Profitability

A

EBITDA

Divided by

Net sales

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5
Q

Return on assets

Profitability

A

Net income

Divided by

Average total assets

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6
Q

Return on equity

Profitability

A

Net income

Divided by

Average total equity

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7
Q

Sustainable growth rate

Profitability

A

ROE x (1 - dividend payout ratio)

Measures growth of a firm without borrowing additional funds

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8
Q

DuPont Model - ROA

Profitability

A

Net income / Average total assets

=

(Net Income/net sales) x (net sales/avg total assets)

=

Net profit margin x total asset turnover

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9
Q

DuPont model - ROE

Profitability

A

(Net income/net sales) x (Net sales/total avg assets) x (total avg assets/avg total equity)

=

Net profit margin x asset turnover x equity multiplier

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10
Q

Earnings per share (EPS)

A

Net income avail to common shareholders

Divided by

Weighted avg common shares outstanding

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11
Q

Diluted earnings per share (DEPS)

A

Net income available to common shareholders, plus amounts that would not have to be paid if potential common stock had been converted (ex dividends on convertible pref stock)

Divided by

Weighted avg common shares outstanding plus additional shares of dilutive stock had been converted

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12
Q

Price/EBITDA ratio

A

Mkt price per share/EBITDA per share

Reflects stock market’s assessment of the firm’s generation of profits through ongoing operations. Reflects how much an investor will spend to “buy” a dollar of EBITDA

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13
Q

Book value per share

A

Total stockholders equity - pref equity

Divided by

Number of common shares outstanding

Reflects net assets available to shareholders divided by shares outstanding. Does not consider future earning potential since at historical prices

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14
Q

Price-earnings ratio (P/E)

A

Market price / EPS

or

Total market value / net income

Reflects stock market’s assessment of earnings quality and prospects

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15
Q

Market to book ratio (price-book ratio)

A

Mkt price per share / book value per share

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16
Q

Price-sales ratio

A

Mkt price per share / sales per share

Reflects belief that strong sales are basic ingredients of profits, and sales is P&L items least subject to manipulation

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17
Q

Earnings yield

A

EPS / mkt price per share

Amount of earnings an investor expects per dollar invested.

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18
Q

Dividend payout ratio

A

Div to common stockholders

Divided by

Income avail to common stockholders

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19
Q

Dividend yield

A

Dividend per share

Divided by

Mkt price per share

20
Q

Shareholder return

A

(Ending stock price - beg stock price + annual dividends per share)

Divided by

Beg stock price

21
Q

AR turnover

A

Net credit sales / avg AR

Avg AR equals beg plus ending div by 2

High turnover means prompt payment

22
Q

Days sales outstanding in receivables

A

Days in year / AR turnover

Can compare to credit terms to see if customer paying within term

23
Q

Inventory turnover

A

COGS / avg inventory

Higher mean strong sales or lower inventory

24
Q

Days sales in inventory

A

Days in year / inventory turnover

25
AP turnover
Purchases / avg AP Higher means firm is paying sooner (maybe discounts)
26
Days purchases in AP
Days in year / AP turnover Can be compared to credit terms to see how early/late firm is paying
27
Operating cycle
DSO in receivables + days sales in inventory Amount of time that passed between acquisition of inventory and cash collection from sale of the inventory
28
Cash cycle
Operating cycle - days purchases in AP Portion of operating cycle when company does not have cash (cash tied up in form of AP)
29
Working capital turnover
Sales / working capital Measures how effectively company uses working capital to generate sales
30
Fixed assets turnover ratio
Net sales / avg net PPE measures how efficiently company is deploying investment in PPE Affected by age of assets and depreciation method
31
Total assets turnover
Net sales / avg total assets
32
Economic profit
Revenues minus explicit and implicit costs
33
Net working capital
Current assets - current liabilities Represents resources available to company to operate in short run if it has to liquidate all current liabilities
34
Current ratio | Liquidity
Curr assets / curr liabilities
35
``` Quick ratio (acid test) (Liquidity) ```
Cash + mktbl securities + net AR divided by Curr liabilities Excludes inventories and prepaid because they are more difficult to liquidate
36
Cash ratio | Liquidity
Cash + mktbl securities Divided by Curr liabilities
37
Cash flow ratio | Liquidity
Cash flow from ops / curr liabilities
38
Net working capital ratio | Liquidity
Curr assets - curr liabilities Divided by Total assets Most conservative working capital ratio
39
Total debt to total capital | Solvency
Total debt / (total liab + equity)
40
Debt to equity ratio | Solvency
Total debt / stockholders equity
41
Debt to total assets | Solvency
Total liabilities / total assets
42
Times interest earned ratio | Solvency
EBIT / interest expense Ideally will only include recurring earnings Capitalized interest should be included
43
Earnings to fixed charges (fixed charge coverage ratio) | Solvency
Earnings before fixed charges Divided by Fixed charges Fixed charges includes interest, required principle payments, and leases
44
Cash flow to fixed charges ratio | Solvency
Cash from ops + fixed charges + tax payments Divided by Fixed charges Fixed charges includes interest, required principle payments, and leases
45
Degree of leverage (general)
Pre-fixed cost income amount Divided by Post-fixed cost income amount
46
Degree of operating leverage
Contribution margin Divided by Op income (or EBIT) Isolates fixed expenses in ongoing operations
47
Degree of financial leverage
EBIT / EBT Indicates interest as the only truly fixed financing cost

CMA Part 2 (3 decks)

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