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47 Cards in this Set
- Front
- Back
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Horizontal common-size data |
Each item is presented as a % of its value in a base year |
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Limitations of Ratio Analysis |
1) not helpful when viewed in isolation 2) require adjustments when companies use diff accounting treatments 3) comparable ratios may be hard to find for companies operating in diff industries 4) must be analyzed relative to one another 5) Range of acceptable values is difficult |
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Activity Ratios |
How well a firm uses its assets |
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Receivables Turnover and Days Sales Outstanding
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Sales / avg. receiveables 365/receivables turnover |
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Inventory Turnover and Days Inventory on Hand |
COGs / avg. inventory 365/inventory turnover |
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Payables Turnover and Payables Payment Period |
Purchases / avg. payables 365/payables turnover |
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Total Asset Turnover |
Revenue/average total assets |
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Fixed Asset Turnover |
Revenue/average net fixed assets |
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Working Capital Turnover |
Revenue / avg working capital |
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Liquidity Ratios
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Determine firm's ability to pay its short-term liabilities |
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Current Ratio |
current assets/current liabilities |
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Quick Ratio |
Cash + Marketable Securities + Receivables / current liabilities |
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Cash Ratio |
Most conservation liquidity measure Cash + Marketable Securities / current liabilities |
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Defensive Internal Ratio |
cash + marketable securities + receivables / avg daily expenditures |
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Cash Conversion Cycle |
Length of time it takes to turn cash investment in inventory back into cash Days sales outstanding + days of inventory on hand - number of days payable |
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Solvency Ratios |
Measure a firm's financial leverage and ability to meet its long-term obligations (debt + coverage ratios) |
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Debt to Equity |
Total debt / total SE |
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Debt to Capital |
Total debt / total debt + total SE |
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Debt to Assets |
Total debt / total assets |
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Financial Leverage Ratio |
Average total assets / average total equity |
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Interest Coverage Ratio |
EBIT / interest payments |
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Fixed Charge Coverage Ratio |
Earnings before interest taxes and lease payments / interest payments + lease payments |
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Profitability Ratios |
Measure overall performance of firm relative to revenues, assets, equity and capital |
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Net Profit Margin |
Net Income / revenue |
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Operating profitability ratios |
How good mgmt is turning efforts into profits (compare top of income statement/sales to profits) |
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Gross Profits |
Net sales - COGS |
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Operating Profits |
EBIT
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Net Income |
Earnings after taxes before dividends |
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Total Capital |
LTD + STD + common and preferred equity OR Total Assets |
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Gross Profit Margin |
Gross profit/revenue |
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Operating Profit Margin |
EBIT / revenue |
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Pretax Margin |
EBT / revenue |
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ROA |
Net Income / avg total assets *this measure can be a little misleading because interest is excluded from numerator but included in denominator |
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Alternative ROA Calculation |
Net Income + Interest Expense (1 - tax rate) / (avg total assets) |
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Operating Return on Assets |
Operating income / avg total assets OR EBIT / avg total assets |
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Return on Total Capital (ROTC) |
EBIT / avg total capital |
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Return on Equity |
Net Income / avg total equity |
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Return on Common Equity |
Net Income - Preferred Dividends / (avg. common equity) |
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3-Term ROE Formula |
Return on Equity = net profit margin * asset turnover * leverage ratio where: net profit margin = net income/revenue asset turnover = revenue/ avg. total assets leverage ratio = avg. total assets / equity |
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5-Term ROE Formula |
Tax burden * interest burden * EBIT margin * asset turnover * financial leverage |
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Tax Burden |
Net Income / EBIT 1-tax rate |
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Interest Burden |
EBT / EBIT |
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EBIT Margin |
EBIT / revenue |
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Sustainable Growth Rate Formula |
g = RR * ROE |
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Retention Rate Formula |
1-dividend payout ratio |
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Dividend Payout Ratio |
Dividends declared / net income available to common |
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CV Sales, Operating Income and Net Income |
SD of sales / mean sales SD of operating income / mean operating income SD of net income / mean net income |
