Ratios - Profitability and Equity

Question 1

Name 9 Profitability Ratios

Answer 1

1) Profit Margin ( on Sales)
2) Return on Total Assets
3) Return on Common Stockholders’ equity
4) Return on Owners’ ( all Stockholders’) Equity
5) Earnings Per Share ( Basic EPS formula)
6) The Price-Earnings ( P/E) Ratio
7) Common Stock Dividends Pay Out Ratio
8) Per Share Basis
9) Common Stock Yield

Question 2

PM

Answer 2

1) Profit Margin
2) measures the net profitability on sales (revenue).

= NI / (net) Sales

Question 3

ROTA

Answer 3

1) Return on Total Assets
2) measures the rate of return on total assets and indicates the efficiency with which invested resources (assets) are used.

= ( NI + ( add back ) Interest Expense ( net of tax effect) / Avg Total Assets

Question 4

ROCSE

Answer 4

1) Return on Common Stock Equity
2) measures the rate of return (earnings) on common stockholders’ investment.

= ( NI - Preferred Dividend ( Obligation for the period only)/ Average Common Stockholders’ Equity

Question 5

ROOE ( all stockholders’)

Answer 5

1) Return on Owners’ Equity
2) measures the rate of return (earnings) on all stockholders’ investment.

= NI / Avg Stockholders’ Equity

Question 6

EPS

Answer 6

1) Earnings Per Share
2) measures the income earned per (average) share of common stock. Indicates ability to pay dividends to common shareholders.

= ( NI - Preferred Dividends ( Obligation for the period only ))/ Weighted Avg Number of Shares Outstanding

Question 7

TP/ER

Answer 7

1) The Price-Earnings (P/E) Ratio
2) measures the price of a share of common stock relative to its latest earnings per share. Indicates a measure of how the market values the stock, especially when compared with other stocks.

= Market Price for a Common Share / Earnings Per ( Common ) Share (EPS)

Question 8

CSDPOR

Answer 8

1) Common Stock Dividends Pay Out Ratio

= Cash Dividends to Common Shareholders / NI to CS

Question 9

PSB

Answer 9

1) Per Share Basis
2) measures the extent (percentage) of earnings distributed to common shareholders.

= Cash Dividends Per Common Share / Earnings Per Common Share

Question 10

CSY

Answer 10

1) Common Stock Yield
2) measures the rate of return (yield) per share of common stock.

= Dividend Per Common Share / Market Price Per Common Share

Question 11

Name 5 Equity / Investment Leverage Ratios

Answer 11

1) Debt to Equity Ratio
2) Owners’ Equity Ratio
3) Debt Ratio
4) Book Value Per Common Stock
5) Book Value per Preferred Share

Question 12

DTER

Answer 12

1) Debit to Equity Ratio
2) measures relative amounts of assets provided by creditors and shareholders.

= Total Liabilities / Total SE

Question 13

OER

Answer 13

1) Owners Equity Ratio
2) measures the proportion of assets provided by creditors. Indicates the extent of leverage in funding the entity.

= Total Liabilities / Total Assets

Question 14

BVPCS

Answer 14

1) Book Value Per Common Stock
2) measures the per share amount of common shareholders’ claim to assets.

= Common Stock Equity / Number of Outstanding Common Stock Shares

Question 15

BVPPS

Answer 15

1) Book Value Per Preferred Share
2) measures the per share amount of preferred shareholders’ claim to assets.

= Preferred Shareholders’ Equity ( including Dividends in arrears) / Number of Outstanding Preferred Stocks