Test 1 Flashcards
What are some other words for the term “profit”
Income and earnings
How do you calculate after tax operating income?
EBIT (1-tax rate)
How do you calculate Return on Assets (ROA)?
Net income/total assets
How do you calculate Return on Equity (ROE)?
Net income/shareholder’s equity
How do you calculate net profit margin (NPM)?
Net income/sales
How do you calculate operating profit margin (OPM)?
EBIT/sales
How do you calculate total assets turnover (TAT)?
Sales/total assets
How do you calculate days sales outstanding (DSO)?
Receivables / (sales/365)
How do you calculate inventory turnover (IT)?
Sales/inventories
How do you calculate fixed asset turnover (FAT)?
Sales/fixed assets
What does ROE show?
How much profit is generated for every dollar of equity on the balance sheet
What does ROA show?
How much profit generated for every dollar of assets
What does NPM show?
How many cents of profit generated one every dollar of sales
What does TAT show?
How efficiently assets are being used (higher number = more efficient)
Is it good for the TD/TA ratio to be high or low?
Low