Ratios + Leverage Formulas Flashcards
Year Over Year Growth (YOY)
(Revenue Year 2/Revenue Year 1) – 1
Compound Annual Growth Rate (CAGR)
(Revenue 2015)/(Revenue 2011) ^ (1/4) – 1
where 4 = 2015 - 2011
Net Profit Margin
Return on Assets (ROA)
Return on Equity
Receivables Turnover
Rule of Thumb: 30 or less is GOOD
Average Collection Period
HIGH = 31 days or more
LOW = 30 Days or less
Inventory Turnover
LOW = too much inventory, not selling fast enough
HIGH = may not have stock when need it, (Stock-outs)
Capital Asset Turnover
Rule of Thumb: less than 1 = BAD
Total Asset Turnover
Rule of Thumb: less than 1 = BAD
Quick Ratio (Acid Test)
Rule of Thumb: less than 1 = BAD
greater than 2 = GOOD
Current Ratio
Rule of Thumb: less than 1 = BAD
greater than 2 = GOOD
Total Debt to Total Assets (Debt to Equity Ratio)
Rule of Thumb: 50% or more = RISKY
Times Earned Interest
Rule of Thumb: less than 1 = TERRIBLE
greater than 5 = GREAT
Gross Profit
Revenue (Sales) - COGS (Sales)
Gross Profit Margin
Gross Profit/ Revenue (or Sales)
Total Contribution Margin
Contribution Margin per Unit
UNIT = Selling Price - Variable Cost per Unit
OR
TOTAL = Total Revenue (Sales) - Total Variable Costs
Total Contribution Margin Ratio
Unit Contribution Margin Ratio
TOTAL = Contribution Margin/ Revenue (or Sales)
OR
UNIT = Contribution Margin per Unit/ Selling Price per Unit
Degree of Operating Leverage (DOL)
Contribution Margin/ EBIT
Degree of Financial Leverage
EBIT/EBT
Degree of Combined Leverage (DCL)
DOL x DFL
Break-Even Point (units)
Fixed Costs/ Contribution Margin per Unit
Break-Even Point in Sales $
Fixed Costs/CMR
Target Profit Point
Fixed Costs + Targeted Profit/ Contribution Margin per unit
Percentage Increase/Decrease
New Value - Original Value/ Original Value x 100
Change in Percentage
(Change in Value/ Original Value) -1 x 100
