Reading 28: Financial Analysis Techniques Flashcards by Jack D

Inventory Turnover Ratio

Activity Ratios

28.x

Financial Analysis Techniques

COGS / Average inventory

COGS is also a measure of “cost of sales”

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Day of Inventory on Hand (DOH)

Activity Ratios

28.x

Financial Analysis Techniques

Number of days in period / inventory turnover

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Receivables Turnover Ratio

Activity Ratios

28.x

Financial Analysis Techniques

Revenue / Average Receivables

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Days of Sales Outstanding (DSO)

Activity Ratios

28.x

Financial Analysis Techniques

Number of days in period / Receivables turnover

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Payables Turnover

Activity Ratios

28.x

Financial Analysis Techniques

Purchases / Average trade payables

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Number of Days of Payables Ratio

Activity Ratios

28.x

Financial Analysis Techniques

Number of days in period / Payables turnover

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Working Capital Turnover

Activity Ratios

28.x

Financial Analysis Techniques

Revenue / Average working capital

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Fixed Asset Turnover

Activity Ratios

28.x

Financial Analysis Techniques

Revenue / Average net fixed assets

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Total Asset Turnover

Activity Ratios

28.x

Financial Analysis Techniques

Revenue / Average total assets

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Current Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

Current assets / current liabilities

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Quick Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

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

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Cash Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

Cash + Short-term marketable investments / Current liabilities

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Defensive Interval Ratio

Liquidity Ratios

28.x

Financial Analysis Techniques

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

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Cash Conversion Cycle (net operating cycle)

Liquidity Ratios

28.x

Financial Analysis Techniques

DOH + DSO - Number of days payables

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Debt-to-Assets Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

Total debt / Total assets

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Debt-to-Capital Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

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

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Debt-to-Equity Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

Total Debt / Total shareholders’ equity

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Financial Leverage Ratio

Solvency Ratios

28.x

Financial Analysis Techniques

Average total assets / Average total equity

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Interest Coverage Ratio

Coverage Ratios

28.x

Financial Analysis Techniques

EBIT / Interest payments

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Fixed Charge Coverage Ratio

Coverage Ratios

28.x

Financial Analysis Techniques

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

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Gross Profit Margin

Profitability Ratios

28.x

Financial Analysis Techniques

Gross profit / Revenue

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Operating Profit Margin

Profitability Ratios

28.x

Financial Analysis Techniques

Operating income / Revenue

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Pretax Margin

Profitability Ratios

28.x

Financial Analysis Techniques

EBT (earnings before tax but after interest) / Revenue

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Net Profit Margin

Profitability Ratios

28.x

Financial Analysis Techniques

Net Income / Revenue

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Operating ROA Return on Investment Ratios 28.x Financial Analysis Techniques

Operating income / Average total assets

ROA Return on Investment Ratios 28.x Financial Analysis Techniques

Net income / Average total assets

Return on Total Capital Return on Investment Ratios 28.x Financial Analysis Techniques

EBIT / Short- and long-term debt and equity

ROE Return on Investment Ratios 28.x Financial Analysis Techniques

Net income / average total equity

Return on Common Equity Return on Investment Ratios 28.x Financial Analysis Techniques

(Net income - Preferred dividends) / Average common equity

ROE (relationship between ROE and ROA; expressing ROE as a product of only two of its components) 28.1a Financial Analysis Techniques

ROE = Net income / Average shareholders' equity =(Net income / Average total assets) x (Average total assets / Average shareholders' equity) =ROA x Leverage

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

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

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

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

P/E Ratio Valuation Ratios 28.x Financial Analysis Techniques

Price per share / Earnings per share

P/CF Ratio Valuation Ratios 28.x Financial Analysis Techniques

Price per share / Cash flow per share

P/S Ratio Valuation Ratios 28.x Financial Analysis Techniques

Price per share / Sales per share

P/BV Ratio Valuation Ratios 28.x Financial Analysis Techniques

Price per share / Book value per share

Basic EPS Valuation Ratios: Per-Share Quantities 28.x Financial Analysis Techniques

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

Diluted EPS Valuation Ratios: Per-Share Quantities 28.x Financial Analysis Techniques

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

Cash flow per share Valuation Ratios: Per-Share Quantities 28.x Financial Analysis Techniques

Cash flow from operations / Weighted average number of shares outstanding

EBITDA per share Valuation Ratios: Per-Share Quantities 28.x Financial Analysis Techniques

EBITDA / Weighted average number of shares outstanding

Dividends per Share Valuation Ratios: Per-Share Quantities 28.x Financial Analysis Techniques

Common dividends declared / Weighted average number of ordinary shares outstanding

Dividend Payout Ratio Valuation Ratios: Dividend-Related Quantities 28.x Financial Analysis Techniques

Common share dividends / Net income attributable to common shares

Retention Rate (b) Valuation Ratios: Dividend-Related Quantities 28.x Financial Analysis Techniques

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

Sustainable Growth Rate Valuation Ratios: Dividend-Related Quantities 28.x Financial Analysis Techniques

b x ROE

Coefficient of Variation of Operating Income Business Risk Ratios 28.x Financial Analysis Techniques

Standard deviation of operating income / Average operating income

Coefficient of Variation of Net Income Business Risk Ratios 28.x Financial Analysis Techniques

Standard deviation of net income / Average net income

Coefficient of Variation of Revenues Business Risk Ratios 28.x Financial Analysis Techniques

Standard deviation of revenue / Average revenue

Capital Adequacy (banks) Financial Sector Ratios 28.x Financial Analysis Techniques

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

Monetary Reserve Requirement (cash reserve ratio) Financial Sector Ratios 28.x Financial Analysis Techniques

Reserves held at central bank / Specified deposit liabilities

Liquid Asset Requirement Financial Sector Ratios 28.x Financial Analysis Techniques

Approved "readily marketable" securities / Specified deposit liabilities

Net Interest Margin Financial Sector Ratios 28.x Financial Analysis Techniques

Net interest income / Total interest - earning assets

Same (or comparable) store sales Retail Ratios 28.x Financial Analysis Techniques

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

Sales per Square Meter ( or Square Foot) Retail Ratios 28.x Financial Analysis Techniques

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

Revenue per Employee Service Company Ratios 28.x Financial Analysis Techniques

Revenue / Total number of employees

Net Income per Employee Service Company Ratios 28.x Financial Analysis Techniques

Net income / Total number of employees

Average Daily Rate Hotel Ratios 28.x Financial Analysis Techniques

Room revenue / Number of rooms sold

Occupancy Rate Hotel Ratios 28.x Financial Analysis Techniques

Number of rooms sold / Number of rooms available

EBIT interest coverage Credit Ratios 28.x Financial Analysis Techniques

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

EBITDA interest coverage Credit Ratios 28.x Financial Analysis Techniques

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

FFO (Funds from operations) Interest Coverage Credit Ratios 28.x Financial Analysis Techniques

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

Return on Capital Credit Ratios 28.x Financial Analysis Techniques

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

FFO (Funds from operations) Credit Ratios 28.x Financial Analysis Techniques

FFO / Total debt

Free Operation Cash Flow to Debt Credit Ratios 28.x Financial Analysis Techniques

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

Discretionary Cash Flow to Debt Credit Ratios 28.x Financial Analysis Techniques

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

Net Cash Flow to Capital Expenditures Credit Ratios 28.x Financial Analysis Techniques

(FFO - Dividends) / Capital expenditures

Debt to EBITDA Credit Ratios 28.x Financial Analysis Techniques

Total debt / EBITDA

Total debt to total debt plus equity Credit Ratios 28.x Financial Analysis Techniques

Total debt / (Total debt + Equity)

Segment Margin Segment Ratios 28.x Financial Analysis Techniques

Segment profit or loss / Segment revenue

Segment Turnover Segment Ratios 28.x Financial Analysis Techniques

Segment revenue / Segment assets

Segment ROA Segment Ratios 28.x Financial Analysis Techniques

Segment profit (or loss) / Segment assets

Segment Debt Ratio Segment Ratios 28.x Financial Analysis Techniques

Segment liabilities / Segment assets