Ratios and Important Equations
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
|
|
||||
|---|---|---|---|---|---|
| Net cash flow | Net income - Noncash revenue + Noncash charges
OR
Net income + Depreciation and amortization
🗑
|
||||
| NOPAT (Net Operating Profit After Taxes) | The amount of profit a company would generate if it had not debt and held no financial assets. Better measure of performance than Net Income.
EBIT(1-tax rate)
🗑
|
||||
| NOWC (Net Operating Working Capital) | Difference between op current assets and op current liabilities. The working capital acquired with investor-supplied funds.
Operating current assets - Operating current liabilities
🗑
|
||||
| Total net operating capital | Total amount of cap needed to run business
NOWC + operating long-term assets
🗑
|
||||
| FCF (Free cash flow) | Amt of cash flow available to investors
NOPAT - Net investment in op cap
OR
(NOPAT + Dep) - (Net inv in op cap + Dep)
OR
Operating cash flow - Gross inv in op cap
OR
Operating cash flow - Gross inv in long-term op assets
🗑
|
||||
| Gross investment in operating capital | Net investment in operating capital + Depreciation
🗑
|
||||
| Operating cash flow | NOPAT + Depreciation
🗑
|
||||
| ROIC (Return on invested capital) | Helps to determine if growth is profitable. If ROIC > rate of return required by investors, then negative FCF is no problem.
NOPAT / Operating capital
🗑
|
||||
| MVA (Market value added) | Difference between market value of stock and equity capital provided
Mkt value of stock - Equity cap provided by shareholders
OR
(Shares outstanding)(Stock price) - Total common equity
🗑
|
||||
| EVA (Economic value added) | Estimate of management value addNOPAT - after-tax cost of capital used to support ops
OR
EBIT(1-taxrate) - (Total net op cap)(WACC)
🗑
|
||||
| Current Ratio | Prime test of liquidity. Creditors generally like it high. Measures extent to which creditors are covered by assets in case of trouble.
Current assets / Current liabilities
🗑
|
||||
| Quick Ratio, Acid Test | Ability of firm to pay off short-term obligations without having to liquidate inventory, which is the least liquid of current assets.
(Current assets - Inventories) / Current liabilities
🗑
|
||||
| Inventory turnover ratio | How many times inventory is cleared and restocked per year. High is good.
Sales / Inventory
🗑
|
||||
| DSO (Days sales outstanding) | Average collection period. Lower the better.
Receivables / (Annual sales/365)
🗑
|
||||
| Fixed assets turnover ratio | How effectively firm uses PPE. Higher the better.
Sales / Net fixed assets
🗑
|
||||
| Total assets turnover ratio | Sales / Total assets
🗑
|
||||
| Debt ratio | Creditors prefer low (bigger cushion). Stockholders may want high (more leverage = more return).
Total liabilities / Total Assets
🗑
|
||||
| Debt to equity ratio | Version of debt ratio that gives perspective on the non-asset side of the BS.
Total liabilities / (Total assets - Total liabilities)
🗑
|
||||
| Market debt ratio | Reflects risk to future cash flows
Total liabilities / (Total liabilities + Market value of equity)
🗑
|
||||
| TIE (Times interest earned) Ratio | Measures how much operating income can decline before firm will be unable to pay annual interest costs. Higher the better.
EBIT / Interest expense
🗑
|
||||
| EBITDA coverage ratio | Like TIE but accounts for other scheduled payments and full available FCF.
EBITDA + Lease payments / (Interest + Principal payments + Lease payments)
🗑
|
||||
| Net profit margin | Profit per dollar of sales
Net Income / Sales
🗑
|
||||
| Operating profit margin | Shows efficiency of operation without consideration for Int or Taxes
EBIT / Sales
🗑
|
||||
| Gross profit margin | Gross profit per dollar of sales before any expenses are deducted
(Sales - COGS) / Sales
🗑
|
||||
| BEP (Basic earning power) ratio | Earning power of firm before consideration of tax and leverage. Good tool to compare companies with different tax/leverage situations.
EBIT / Total assets
🗑
|
||||
| ROA (Return on total assets) | How much a company earns per dollar of assets
Net income available to stockholders / Total assets
OR
Profit margin * Total assets turnover
🗑
|
||||
| ROE (Return on common equity) | How effectively management uses funds from equity
Net income available to stockholders / Equity
OR
ROA * Equity multiplier
🗑
|
||||
| P/E (Price to Earnings) Ratio | How much investors are willing to pay per dollar of profits. Higher the better.
Price per share / earnings per share
🗑
|
||||
| Book value per share | Common equity / Shares outstanding
🗑
|
||||
| M/B (Market to Book) Ratio | Market price per share / Book value per share
🗑
|
||||
| Equity multiplier | Helps get ROE from ROA
Total assets / Common equity
🗑
|
||||
| AFN (Additional funds needed) | Required increase in assets - Increase in spontaneous liabilities - Increase in retained earnings
🗑
|
||||
| Self-supporting growth rate | M(1-POR)(S)
over
A - L - M(1-POR)(S)
M = last year's profit margin
POR = last year's payout ratio, net income/sales
S = last year's sales
A = required increase in assets
L = last year's spontaneous assets (payables + accruals)
🗑
|
||||
| CCC (Cash conversion cycle) | Time from which the product materials are bought, product is made and product is sold.
Inventory conversion period + Average collection period - Payables deferral period
🗑
|
||||
| Inventory conversion period | Time it takes to convert new inventory to cash.
Inventory / COGS per day
🗑
|
||||
| Payables deferral period | Time given by suppliers to pay back
Payables / COGS per day
🗑
|
||||
| Nominal cost of trade credit | Cost incurred by firm using supplier credit (forgoing discounts) instead of bank.
Discount % / (100 - discount %)
multiplied by
365/ (Days credit is outstanding - discount period)
🗑
|
||||
| Approximate annual rate (add on) | A method of calculating interest whereby the interest payable is determined at the beginning of a loan and added onto the principal.
Interest paid / (Amount received / 2)
🗑
|
Review the information in the table. When you are ready to quiz yourself you can hide individual columns or the entire table. Then you can click on the empty cells to reveal the answer. Try to recall what will be displayed before clicking the empty cell.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Created by:
9212507
Popular Finance sets