Corporate Finance: Ratios

Front 1

Interest expense is tax __1__

Back 1

deductible

Front 2

Debt is called financial __1__

Back 2

leverage

Front 3

The use of debt can improve the returns to __1__

Back 3

stockholders

Front 4

Debt is a fixed or variable cost to a firm?

Back 4

fixed

Front 5

Does Tax law favor debt?

Back 5

yes, hence the tax deduction on interest expenses

Front 6

Debt Ratio, Debt-equity ratio, and equity multiplier are three ways to look at the same thing, which is:

Back 6

the firms use of debt to finance its assets.

Front 7

How is the debt ratio calculated?

Back 7

Total debt Divided by Total assets

Front 8

How is the debt-to-equity ratio calculated?

Back 8

total debt divided by total owner's equity

Front 9

how is the Equity multiplier calculated?

Back 9

Total Assets divided by total owner's equity

Front 10

how do you find the Total Debt

Back 10

total assets - Total owner's equity

Front 11

Asset Management Ratios attempt to measure the firm's success in managing its assets to generate __1__

Back 11

1. Sales

Front 12

The Receivables Turnover and Days' Receivables Ratios assess the firm's management of its __1__ and, thus, its __2__ policy

Back 12

1. Accounts Receivables .
2. Credit Policy

Front 13

True or False: The higher the receivables turnover ratio, the worse

Back 13

False. It's better

Front 14

The higher the receivables turnover, the __1__ the firm collects is receivables

Back 14

1. sooner.

Front 15

The receivables turnover ratio is calculated by:

Back 15

Sales divided by Accounts Receivable

Front 16

how is the day's in receivables ratio calculated?

Back 16

365 divided by the receivables turnnover ratio

Front 17

Days' receivables calculates how long, on average, it takes for the firm to collect its sales from customers on __1__

Back 17

1. credit

Front 18

The fixed Asset Turnover Ratio measures how the firm is managing its __1__ assets to generate __2__

Back 18

1. Fixed
2. Sales

Front 19

Be careful when measuring the fixed asset turnover ratio for firms because its book value that we're looking at can be very different than it's __1__ value

Back 19

1. Market

Front 20

How do you calculate the fixed asset turnover ratio?

Back 20

Sales divided by net fixed assets

Front 21

the total asset ratio is calculated by

Back 21

Sales divided by Total Assets

Front 22

The Profit Margin indicates the dollars in income that the firm earns on each dollar of __1__

Back 22

1. Sales

Front 23

How is the profit Margin calculated?

Back 23

Net Income divided by Sales

Front 24

How is the return on Assets calculated?

Back 24

Net Income divided by Assets

Front 25

How is the return on Equity calculated?

Back 25

Net income divided by Total Owner's equity

Front 26

How Do you calculate the price-earnings ratio?

Back 26

Price per share divided by Earnings per share

Front 27

how is the earnings per share calculated?

Back 27

NEt income divided by Number of shares outstanding.

Front 28

The __1__ ratio indicates how much investors are willing to pay per dollar of current earnings.

Back 28

1. P/E

Front 29

P/E ratios are associated with __1__ stocks

Back 29

1. growth

Front 30

historical cost of accounting of a firm is also considered a __1__ value

Back 30

1. Book

Front 31

how do you calculate the market-to-book ratio?

Back 31

Price per share divided by Book value per share

Front 32

Book value per share ratio:

Back 32

Total owner's equity divided by number of shares outstanding

Front 33

Which ratio helps investors help identify which stocks are undervalued?

Back 33

the market-to-book ratio.