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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
Q

AP turnover

A

Purchases / avg AP

Higher means firm is paying sooner (maybe discounts)

26
Q

Days purchases in AP

A

Days in year / AP turnover

Can be compared to credit terms to see how early/late firm is paying

27
Q

Operating cycle

A

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
Q

Cash cycle

A

Operating cycle - days purchases in AP

Portion of operating cycle when company does not have cash (cash tied up in form of AP)

29
Q

Working capital turnover

A

Sales / working capital

Measures how effectively company uses working capital to generate sales

30
Q

Fixed assets turnover ratio

A

Net sales / avg net PPE

measures how efficiently company is deploying investment in PPE

Affected by age of assets and depreciation method

31
Q

Total assets turnover

A

Net sales / avg total assets

32
Q

Economic profit

A

Revenues minus explicit and implicit costs

33
Q

Net working capital

A

Current assets - current liabilities

Represents resources available to company to operate in short run if it has to liquidate all current liabilities

34
Q

Current ratio

Liquidity

A

Curr assets / curr liabilities

35
Q 
Quick ratio (acid test)
(Liquidity)
A

Cash + mktbl securities + net AR

divided by

Curr liabilities

Excludes inventories and prepaid because they are more difficult to liquidate

36
Q

Cash ratio

Liquidity

A

Cash + mktbl securities

Divided by

Curr liabilities

37
Q

Cash flow ratio

Liquidity

A

Cash flow from ops / curr liabilities

38
Q

Net working capital ratio

Liquidity

A

Curr assets - curr liabilities

Divided by

Total assets

Most conservative working capital ratio

39
Q

Total debt to total capital

Solvency

A

Total debt / (total liab + equity)

40
Q

Debt to equity ratio

Solvency

A

Total debt / stockholders equity

41
Q

Debt to total assets

Solvency

A

Total liabilities / total assets

42
Q

Times interest earned ratio

Solvency

A

EBIT / interest expense

Ideally will only include recurring earnings

Capitalized interest should be included

43
Q

Earnings to fixed charges (fixed charge coverage ratio)

Solvency

A

Earnings before fixed charges

Divided by

Fixed charges

Fixed charges includes interest, required principle payments, and leases

44
Q

Cash flow to fixed charges ratio

Solvency

A

Cash from ops + fixed charges + tax payments

Divided by

Fixed charges

Fixed charges includes interest, required principle payments, and leases

45
Q

Degree of leverage (general)

A

Pre-fixed cost income amount

Divided by

Post-fixed cost income amount

46
Q

Degree of operating leverage

A

Contribution margin

Divided by

Op income (or EBIT)

Isolates fixed expenses in ongoing operations

47
Q

Degree of financial leverage

A

EBIT / EBT

Indicates interest as the only truly fixed financing cost

CMA Part 2 (3 decks)

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