SU6 - Ratio Analysis Flashcards
Quick/Acid Test Ratio
Liquidity Measurment
Cash + Marketable Securities + Net recievables/ Current Liabilties
Cash Ratio
Cash + Marketable Securities/CL
Cash Flow Ratio
Cash flow from Ops/CL
Net Working Capital Ratio
(CA - CL)/Total Assets
Gross Profit Margin Ratio
Net Sales - COGS/ Net Sales
Operating Profit Margin
Operating Income/Net Sales
Net Profit Margin Ratio
Net INcome/Net Sales
Return on Assets
Net Income/ AVERAGE Total Assets
Return on Equity
Net Income/ AVG Total Equity
Sustainable Growth Rate
ROE X (1-Dividend Payout Rate)
DuPont Model ROA
NI/Avg Total Assets =
Net Profit MArgin x Total Asset Turnover
or
NI/NS x NS/Avg Total Assets
Dupont Model ROE
ROA x Equity Multiplier
or
Net Profit Margin x Assets Turnover x Equity Multiplier
NI/NS x NS/Avg T.Assets x Avg T. Assets/Avg T. Equity
Debt to Capital Ratio
T. Debt/T. Capital
% of capital structure provided by debt
Debt to Equity Ratio
T. Debt/Stockholder’s Equity
How much debt exceeds equity stake
Times Interest Earned
EBIT/Interest Expense
Evaluates a firm’s ability to pay it’s obligations
Degree of Leverage
Pre fixed cost income/Post Fixed Cost Income
Degree of Operating Leverage
Contibution Margin/Operating Income
or
%Change in Op Income(or)EBIT/%Change in Sales
Measures fixed costs of PPE
Increased Operating Leverage means Op Income i smore sensitive to sales volume because of a firm’s ability to ramp-up
Degree of Financial Leverage
EBIT/EBT
or
$Change in Net Income/%Change in EBIT
Fixed cost in this case is just interest on debt
Off Balance Sheet Financing
Methods to reduce a firm’s debt load on the balance sheet, improving ratios
Investments in Unconsolidated Subsidiaries
Type of Off B/S Financing
Minority equity ownership is reported as an asset, so liabilities are not wholly represented on the parent B/S
Special Purpose Entities
Type of Off B/S Financing
A specific entity for a task a take or pay contract is established to trasfer the completed project to the parent’s books?
Ex: Building a new plant
Operating Leases
Type of off b/s financing
A long term contract that is recorded via rental expense payments. The full debt amount is not recorded on the b/s
Factoring Receivables with recourse
type of off b/s finaincing
With Recourse means the firm is CONTINGENTLY liable, and this liability is not recorded on the balance sheet
