Cma Prep Part 1 - Ratio Analysis

Front 1

Current Ratio

Back 1

Current Assets / Current Liabilities

Front 2

Quick Ratio

Back 2

Also known as Acid-Test Ratio
(Cash + Cash Equivalents + Receivables + Marketable Securities) / Current Liabilities

Note: excludes inventories and prepaid expenses
A level trend of this ratio can be an indicator of good management

Front 3

Receivables Turnover

Back 3

indicates efficiency of receivables collection and quality of receivables

Net Credit Sales / Average Trade Receivables (Net)

Front 4

Average Collection Period (or Days Sales Outstanding)

Back 4

365 / Receivables Turnover

or

(365 * Average Trade Receivables) / Net Credit Sales

Front 5

Inventory Turnover

Back 5

Cost of Sales / Average Inventory

Front 6

Days Sales in Inventory

Back 6

365 / Inventory Turnover

or

(365 * Average Inventory) / Cost of Sales

Front 7

Accounts Payables Turnover

Back 7

Cost of Goods Sold / Average Accounts Payable

Front 8

Days Purchases in Accounts Payable

Back 8

365 / Accounts Payable Turnover

Or

(365 * Average Accounts Payable) / Cost of Goods Sold

Front 9

Operating Cycle

Back 9

Average Collection Period + Number of Days in Inventory

Front 10

Cash Flow Cycle

Back 10

Operating Cycle - (days purchases in accounts payable)

Recognizes cash is not used to purchase inventory at the time it is required

Front 11

Financial Leverage Index

Back 11

Takes into account the tax deductible nature of leveraged interest expense

Return on Equity / Adjusted Return on Assets
where ROA is (Net Income + interest expense(1-tax rate))/Assets

FLI>1 means financial leverage is favorable
FLI<1 is unfavorable (interest too high, inefficient use of assets)

Front 12

Financial Leverage Ratio

Back 12

Total Assets / Owners' Equity

Front 13

Asset Coverage

Back 13

Total Assets / Long-Term Debt

Front 14

Times Interest Earned

Back 14

EBIT (Net Income + Interest Expense + Income Tax Expense) / Interest Expense

Front 15

Earnings to Fixed Charges

Back 15

Takes into account use of lease financing

(EBIT + Lease Charges) / (Interest Expense + Lease Charges)

Front 16

Return on Assets

Back 16

Net Income after Taxes / Average Total Assets

Front 17

Asset Turnover

Back 17

Sales / Average Total Assets

Front 18

Return on Common Stockholders' Equity

Back 18

(Net income after taxes - Preferred Dividends) / Average Common Stockholders' Equity

Front 19

ROE breakdown (DuPont Analysis)

Back 19

ROE = Adjusted Profit Margin x Asset Turnover x Financial Leverage

Adjusted profit margin is (net income - preferred dividends) / sales

Front 20

Return on Stockholders' Investment

Back 20

(Dividends + Market value of earnings retained) /
(number of shares x share price)