Ratios for FAR

Question 1

Gross margin or gross profit margin

Answer 1

Sales (net) - COGS
_____________________
Sales (net)

Question 2

Profit Margin

Answer 2

Net income
_______________
Sales (net)

Question 3

Return on sales

Answer 3

Income before interest income, interest expense, and taxes
________________________________
Sales (net)

Question 4

Return on assets

Answer 4

Net income
_______________________________
Average total assets

Question 5

Dupont return on assets

Answer 5

Profit margin x Asset Turnover

Question 6

Return on Equity

Answer 6

Net income
_____________________________
Average total equity

Question 7

Operating cash flow ratio

Answer 7

Cash flow from operations
_____________________________
Current liabilities

Question 8

Current ratio

Answer 8

Current Assets
______________________________
Current liabilities

Question 9

Quick Ratio

Answer 9

Cash and cash equivalents + ST marketable securities + Receivables (net)
_______________________________
Current liabilities

Question 10

Accounts receivable turnover

Answer 10

Sales (net)
_______________________________
Average accounts receivable (net)

Question 11

Days sales in accounts receivable

Answer 11

Ending accounts receivable (net)
______________________________
Sales (net) / 365

Question 12

Inventory Turnover

Answer 12

Cost of Goods Sold
_______________________
Average inventory

Question 13

Days in Inventory

Answer 13

Ending Inventory
_________________________
COGS / 365

Question 14

Accounts Payable Turnover

Answer 14

COGS
______________________________
Average accounts payable

Question 15

Days of payables outstanding

Answer 15

Ending accounts payable
___________________________
COGS / 365

Question 16

Cash conversion cycle

Answer 16

Days sales in accounts receivable + Days in inventory - Days of payables outstanding

Question 17

Solvency Ratio

Debt-to-equity ratio

Answer 17

Total Liabilities
_____________________________
Total Equity

Question 18

Solvency Ratio

Total Debt Ratio

Answer 18

Total liabilities
___________________________
Total assets

Question 19

Solvency Ratio

Equity Multiplier

Answer 19

Total assets
____________________________
Total Equity

Question 20

Solvency Ratio

Times Interest Earned

Answer 20

Income before interest expense and taxes
______________________________
Interest expense

OR

Earnings before interest and taxes
______________________________
Interest expense

Question 21

Performance Metrics

EBITDA

Answer 21

Earnings Before Interest, Taxes, Depreciation and Amortization

Top-down calc: Sales - COGS - Operating expenses (excluding depreciation and amortization)

Bottom-up calc: Net income + income tax expense + interest expenses + Depreciation and amortization

Question 22

Performance Metrics

Earnings per Share

Answer 22

Income available to common shareholders
____________________________
Weighted average common shares outstanding

Question 23

Performance Metrics

Price-to-earnings ratio

Answer 23

Price per share
________________________________
Basic earnings per share

Question 24

Performance Metrics

Dividend Payout

Answer 24

Cash dividends
___________________________
Net income

Question 25

Performance Metrics

Asset Turnover

Answer 25

Net Sales
______________________________
Average total assets