SU 3: Profitability Analysis & Analytical Issues Flashcards
EBITDA
Earnings before interest, taxes, depreciation and amortization. This approximates accrual-basis profits for ongoing operations
EBITDA Margin Percentage
EBITDA/Net Sales
Return on Assets (ROA)
Net Income/Average total assets
DuPont Model for Return on Assets
Net Income/Average Total Assets=Net profit margin [Net Income/Sales] x Total asset turnover [Sales/Average Total Assets]
DuPont Model for Return on Equity
Net profit margin x Assets turnover x Equity multiplier
DuPont Model for Return on Common Equity
Net profit margin x Total asset turnover x Common equity multiplier
Equity Mutliplier
Average total assets/Average total equity
Net Profit Margin
Net Income/Net Sales
Return on Common Equity (ROCE)
Net income - Preferred dividends/Average common equity
Common Equity Multiplier
Average total assets/Average common equity
Book Value per Share
Total equity - Liquidation value of preferred equity/Common shares outstanding
Market/Book Ratio
Market price per share/Book value per share
Price/Earnings Ratio
Market price per share/Diluted earnings per share
Price/EBITDA Ratio
Market price per share/EBITDA
Return on Equity (ROE)
Net Income/Average total equity
Basic Earnings per Share (BEPS)
Income available to common shareholders (IACS)/Weighted-average number of common shares outstanding
Earnings Yield
Earnings per share/Market price per share
Dividend Payout Ratio
Dividend to common shareholders/IACS or EPS
Dividend Yield
Dividend per share/Market price per share
Reporting Currency
The currency in which an entity prepares it’s financial statements
Functional currency
The currency of the primary economic environment in which the entity operates
Foreign currency transactions
Fixed in a currency other than the functional currency (i.e. Buying or selling on credit)
Foreign currency translation
Amounts that are 1) denominated in a different currency or 2) are measured in a different currency (i.e. a liability denominated in a foreign currency)
Impairment Loss (GAAP)
1) Compare the carrying amount to the undiscounted cash flows, if the carrying amount is greater then 2) the impairment is booked for the difference between the carrying amount and the fair value
Impairment Loss (IFRS)
Equals the excess of the carrying amount over its recoverable amount. Which is the greater of the fair value minus costs to sell or value in use
