Vol. 3 LM4 Various Analysis

Question 1

Concept

decomposition of ROE

p. 224

Answer 1

DuPont analysis

Question 2

Describe

DuPont analysis

p. 224

Answer 2

• Decomposition of ROE
• involves expressing the basic ratio as the product of component ratios

Question 3

Decompose

ROE

p. 225

Answer 3

Question 4

Concept

p. 228

Answer 4

DuPont Analysis of ROE

Question 5

List

valuation ratios

p. 230

Answer 5

• P/E
• P/CF
• P/S
• P/BV

Question 6

Calculate

P/E Ratio

p. 230

Answer 6

numerator price per share
denominator earnings per share

Question 7

Calculate

P/CF Ratio

p. 230

Answer 7

numerator price per share
denominator cash flow per share

Question 8

Calculate

P/S Ratio

p. 230

Answer 8

numerator price per share
denominator sales per share

Question 9

Calculate

P/BV Ratio

p. 230

Answer 9

numerator price per share
denominator book value per share

Question 10

List

per-share quantities

p. 230

Answer 10

• Basic EPS
• Diluted EPS
• Cash flow per share
• EBITDA per share
• Dividends per share

Question 11

Calculate

Basic EPS

p. 230

Answer 11

numerator net income - preferred dividends
denominator weighted average number of ordinary shares outstanding

Question 12

Calculate

Diluted EPS

p. 230

Answer 12

numerator adjusted income available for ordinary shares, reflecting conversion of dilutive securities
denominator weighted average number of ordinary and potential ordinary shares outstanding

Question 13

Calculate

Cash flow per share

p. 230

Answer 13

numerator cash flow from operations
denominator weighted average number of shares outstanding

Question 14

Calculate

EBITDA per share

p. 230

Answer 14

numerator EBITDA
denominator Weighted average number of shares outstanding

Question 15

Calculate

Dividends per share

p. 230

Answer 15

numerator common dividends declared
denominator. weighted average number of ordinary shares outstanding

Question 16

Calculate

Dividend payout ratio

p. 230

Answer 16

numerator Common share dividends
denominator Net income attributable to common shares

Question 17

Calculate

dividend payout ratio

p. 230

Answer 17

numerator Common share dividends
denominator Net income attributable to common shares

Question 18

Calculate

Retention rate (b)

p. 230

Answer 18

numerator net income attributable to common shares - common share dividends
denominator net income attributable to common shares

Question 19

Fill in the blank

Because P/E ratios are calculated using net income, the ratios can be sensitive to ____ or ____

p. 231

Answer 19

non-recurring earnings
OR
one-time earnings events

Question 20

Concept

this ratio may be preferable to the P/E ratio where earnings quality may be an issue

p. 231

Answer 20

price to cash flow

Question 21

Concept

Because it is calculated using income before interest, taxes, and depreciation, it can be used to eliminate the effect of different levels of fixed asset investment across companies

p. 231

Answer 21

EBITDA per share