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CFA Level I Formulas > Reading 28: Financial Analysis Techniques > Flashcards

Reading 28: Financial Analysis Techniques Flashcards

1
Q

Inventory Turnover Ratio

Activity Ratios

28.x

Financial Analysis Techniques

A

COGS / Average inventory

COGS is also a measure of “cost of sales”

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2
Q

Day of Inventory on Hand (DOH)

Activity Ratios

28.x

Financial Analysis Techniques

A

Number of days in period / inventory turnover

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3
Q

Receivables Turnover Ratio

Activity Ratios

28.x

Financial Analysis Techniques

A

Revenue / Average Receivables

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4
Q

Days of Sales Outstanding (DSO)

Activity Ratios

28.x

Financial Analysis Techniques

A

Number of days in period / Receivables turnover

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5
Q

Payables Turnover

Activity Ratios

28.x

Financial Analysis Techniques

A

Purchases / Average trade payables

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6
Q

Number of Days of Payables Ratio

Activity Ratios

28.x

Financial Analysis Techniques

A

Number of days in period / Payables turnover

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7
Q

Working Capital Turnover

Activity Ratios

28.x

Financial Analysis Techniques

A

Revenue / Average working capital

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8
Q

Fixed Asset Turnover

Activity Ratios

28.x

Financial Analysis Techniques

A

Revenue / Average net fixed assets

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9
Q

Total Asset Turnover

Activity Ratios

28.x

Financial Analysis Techniques

A

Revenue / Average total assets

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10
Q

Current Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

A

Current assets / current liabilities

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11
Q

Quick Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

A

Cash + Short-term marketable investments + Receivables / Current liabilities

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12
Q

Cash Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

A

Cash + Short-term marketable investments / Current liabilities

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13
Q

Defensive Interval Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

A

Cash + Short-term Marketable Investments + Receivables / Daily cash expenditures

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14
Q

Cash Conversion Cycle (net operating cycle)

Liquidity Ratios

28.x

Financial Analysis Techniques

A

DOH + DSO - Number of days payables

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15
Q

Debt-to-Assets Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

A

Total debt / Total assets

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16
Q

Debt-to-Capital Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

A

Total debt / (Total debt + Total shareholders’ equity)

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17
Q

Debt-to-Equity Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

A

Total Debt / Total shareholders’ equity

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18
Q

Financial Leverage Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

A

Average total assets / Average total equity

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19
Q

Interest Coverage Ratio

Coverage Ratios

28.x

Financial Analysis Techniques

A

EBIT / Interest payments

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20
Q

Fixed Charge Coverage Ratio

Coverage Ratios

28.x

Financial Analysis Techniques

A

(EBIT + Lease payments) / (Interest payments + lease payments)

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21
Q

Gross Profit Margin

Profitability Ratios

28.x

Financial Analysis Techniques

A

Gross profit / Revenue

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22
Q

Operating Profit Margin

Profitability Ratios

28.x

Financial Analysis Techniques

A

Operating income / Revenue

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23
Q

Pretax Margin

Profitability Ratios

28.x

Financial Analysis Techniques

A

EBT (earnings before tax but after interest) / Revenue

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24
Q

Net Profit Margin

Profitability Ratios

28.x

Financial Analysis Techniques

A

Net Income / Revenue

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25
Q

Operating ROA

Return on Investment Ratios

28.x

Financial Analysis Techniques

A

Operating income / Average total assets

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26
Q

ROA

Return on Investment Ratios

28.x

Financial Analysis Techniques

A

Net income / Average total assets

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27
Q

Return on Total Capital

Return on Investment Ratios

28.x

Financial Analysis Techniques

A

EBIT / Short- and long-term debt and equity

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28
Q

ROE

Return on Investment Ratios

28.x

Financial Analysis Techniques

A

Net income / average total equity

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29
Q

Return on Common Equity

Return on Investment Ratios

28.x

Financial Analysis Techniques

A

(Net income - Preferred dividends) / Average common equity

30
Q

ROE

(relationship between ROE and ROA; expressing ROE as a product of only two of its components)

28.1a

Financial Analysis Techniques

A

ROE = Net income / Average shareholders’ equity

=(Net income / Average total assets) x (Average total assets / Average shareholders’ equity)

=ROA x Leverage

31
Q

ROE

(relationship between ROE and ROA; expressing ROE as a product of only two of its components, AND decomposing ROA)

28.1b

Financial Analysis Techniques

A

ROE = (Net income / Average shareholders’ equity)

= (Net income / Revenue) x (Revenue / Average total assets) x (Average total assets / Average shareholders’ equity)

= Net profit margin x Total asset turnover x Leverage

32
Q

ROE

(relationship between ROE and ROA; expressing ROE as a product of only two of its components, AND decomposing ROA and decomposing net profit margin to separate effects of taxes and interest)

28.1c

Financial Analysis Techniques

A

ROE = (Net income / Average shareholders’ equity)

= (Net income / EBT) x (EBT / EBIT) x ( EBIT / Revenue) x (Revenue / Average total assets) x (Average total assets / Average shareholders’ equity)

= Tax burden x Interest burden x EBIT margin x Total asset turnover x Leverage

33
Q

P/E Ratio

Valuation Ratios

28.x

Financial Analysis Techniques

A

Price per share / Earnings per share

34
Q

P/CF Ratio

Valuation Ratios

28.x

Financial Analysis Techniques

A

Price per share / Cash flow per share

35
Q

P/S Ratio

Valuation Ratios

28.x

Financial Analysis Techniques

A

Price per share / Sales per share

36
Q

P/BV Ratio

Valuation Ratios

28.x

Financial Analysis Techniques

A

Price per share / Book value per share

37
Q

Basic EPS

Valuation Ratios: Per-Share Quantities

28.x

Financial Analysis Techniques

A

(Net income - preferred dividends) / Weighted average number of ordinary shares outstanding

38
Q

Diluted EPS

Valuation Ratios: Per-Share Quantities

28.x

Financial Analysis Techniques

A

Adjusted income available for ordinary shares, reflecting conversion of dilutive securities / Weighted average number of ordinary and potential ordinary shares outstanding

39
Q

Cash flow per share

Valuation Ratios: Per-Share Quantities

28.x

Financial Analysis Techniques

A

Cash flow from operations / Weighted average number of shares outstanding

40
Q

EBITDA per share

Valuation Ratios: Per-Share Quantities

28.x

Financial Analysis Techniques

A

EBITDA / Weighted average number of shares outstanding

41
Q

Dividends per Share

Valuation Ratios: Per-Share Quantities

28.x

Financial Analysis Techniques

A

Common dividends declared / Weighted average number of ordinary shares outstanding

42
Q

Dividend Payout Ratio

Valuation Ratios: Dividend-Related Quantities

28.x

Financial Analysis Techniques

A

Common share dividends / Net income attributable to common shares

43
Q

Retention Rate (b)

Valuation Ratios: Dividend-Related Quantities

28.x

Financial Analysis Techniques

A

(Net income attributable to common shares - common share dividends) / Net income attributable to common shares

44
Q

Sustainable Growth Rate

Valuation Ratios: Dividend-Related Quantities

28.x

Financial Analysis Techniques

45
Q

Coefficient of Variation of Operating Income

Business Risk Ratios

28.x

Financial Analysis Techniques

A

Standard deviation of operating income / Average operating income

46
Q

Coefficient of Variation of Net Income

Business Risk Ratios

28.x

Financial Analysis Techniques

A

Standard deviation of net income / Average net income

47
Q

Coefficient of Variation of Revenues

Business Risk Ratios

28.x

Financial Analysis Techniques

A

Standard deviation of revenue / Average revenue

48
Q

Capital Adequacy (banks)

Financial Sector Ratios

28.x

Financial Analysis Techniques

A

Various components of capital / Various measures such as risk-weighted assets, market risk exposure, or level of operational risk assumed

49
Q

Monetary Reserve Requirement (cash reserve ratio)

Financial Sector Ratios

28.x

Financial Analysis Techniques

A

Reserves held at central bank / Specified deposit liabilities

50
Q

Liquid Asset Requirement

Financial Sector Ratios

28.x

Financial Analysis Techniques

A

Approved “readily marketable” securities / Specified deposit liabilities

51
Q

Net Interest Margin

Financial Sector Ratios

28.x

Financial Analysis Techniques

A

Net interest income / Total interest - earning assets

52
Q

Same (or comparable) store sales

Retail Ratios

28.x

Financial Analysis Techniques

A

Average revenue growth year over year for stores open in both periods / Not applicable

53
Q

Sales per Square Meter ( or Square Foot)

Retail Ratios

28.x

Financial Analysis Techniques

A

Revenue / Total retail space in square meters ( or square feet)

54
Q

Revenue per Employee

Service Company Ratios

28.x

Financial Analysis Techniques

A

Revenue / Total number of employees

55
Q

Net Income per Employee

Service Company Ratios

28.x

Financial Analysis Techniques

A

Net income / Total number of employees

56
Q

Average Daily Rate

Hotel Ratios

28.x

Financial Analysis Techniques

A

Room revenue / Number of rooms sold

57
Q

Occupancy Rate

Hotel Ratios

28.x

Financial Analysis Techniques

A

Number of rooms sold / Number of rooms available

58
Q

EBIT interest coverage

Credit Ratios

28.x

Financial Analysis Techniques

A

EBIT / Gross interest (prior to deductions for capitalized interest or interest income)

59
Q

EBITDA interest coverage

Credit Ratios

28.x

Financial Analysis Techniques

A

EBITDA / Gross interest (prior to deductions for capitalized interest or interest income)

60
Q

FFO (Funds from operations) Interest Coverage

Credit Ratios

28.x

Financial Analysis Techniques

A

FFO plus interest paid, inus operating lease adjustments / Gross interest (prior to deductions for capitalized interest or interest income)

61
Q

Return on Capital

Credit Ratios

28.x

Financial Analysis Techniques

A

EBIT / Average capital

Where: capital = equity, plus non-current deferred taxes, plus debt

62
Q

FFO (Funds from operations)

Credit Ratios

28.x

Financial Analysis Techniques

A

FFO / Total debt

63
Q

Free Operation Cash Flow to Debt

Credit Ratios

28.x

Financial Analysis Techniques

A

(CFO (adjusted) - capital expenditures) / Total debt

64
Q

Discretionary Cash Flow to Debt

Credit Ratios

28.x

Financial Analysis Techniques

A

(CFO - capital expenditures - dividends paid) / Total debt

65
Q

Net Cash Flow to Capital Expenditures

Credit Ratios

28.x

Financial Analysis Techniques

A

(FFO - Dividends) / Capital expenditures

66
Q

Debt to EBITDA

Credit Ratios

28.x

Financial Analysis Techniques

A

Total debt / EBITDA

67
Q

Total debt to total debt plus equity

Credit Ratios

28.x

Financial Analysis Techniques

A

Total debt / (Total debt + Equity)

68
Q

Segment Margin

Segment Ratios

28.x

Financial Analysis Techniques

A

Segment profit or loss / Segment revenue

69
Q

Segment Turnover

Segment Ratios

28.x

Financial Analysis Techniques

A

Segment revenue / Segment assets

70
Q

Segment ROA

Segment Ratios

28.x

Financial Analysis Techniques

A

Segment profit (or loss) / Segment assets

71
Q

Segment Debt Ratio

Segment Ratios

28.x

Financial Analysis Techniques

A

Segment liabilities / Segment assets

CFA Level I Formulas (34 decks)

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