Techniques Flashcards
Vertical common size income statement ratios
Income statement acct / sales
Vertical common size balance sheet ratios
Balance sheet acct / total assets
Activity ratios
How well a firm uses various assets
Liquidity ratios
Ability to pay short term obligations
Solvency ratios
Info on firms financial leverage and ability to meet longer term obligations
Profitability ratios
How well company generates operating profits and net profits from sales
Valuation ratios
Used to compare relative valuation of companies
Sales per share, eps, price to cash flow per share
Receivables turnover
Annual sales / ave receivables
Days of sales outstanding
365 / receivables turnover
Inventory turnover
COGS / ave inventory
Days of inventory on hand
365 / inventory turnover
Payables turnover
Purchases / ave accts payable
Number of days of payables
365 / payables turnover
Cash conversion cycle
= days of sales outstanding
+ days of inventory on hand
+ number of days of payables
Current ratio
Current assets / current liabilities
Quick ratio
(Current assets - inventories) / current liabilities
Gross profit margin
= (rev - cogs) / rev
= gross profit / revenue
Operating profit margin
= EBIT / revenue
EBIT = operating income
Net profit margin
= net income / revenue
Return on assets (ROA)
Net income / ave total assets
Return on equity
Net income / ave equity
DuPont analysis
ROE =
Gross profit margin
+ total asset turnover
+ financial leverage multiplier
Total asset turnover
Revenue / assets
Financial leverage multiplier
Assets / equity
Aka equity multiplier
Operating leverage
% change EBIT / % change sales
Debt to assets
Total debt / total assets
Debt to equity
Total debt / stockholders equity
Working capital
Current assets - current liabilities
Working capital turnover
Revenue / ave working capital
Sustainable growth rate
(Earnings retention rate) • (ROE)
Earnings retention rate
= 1 - payout ratio
Payout ratio
= common div / (net inc - pref div)
Interest coverage ratio
EBIT / interest payments
