F7 - Ratio Analysis

Front 1

Working Capital - Formula (STAR):

Back 1

Working capital = Current assets - Current Liabilities

Front 2

Current ratio (working capital ratio) - Calculation (STAR):

Back 2

Current ratio (working capital ratio) = current assets/current liabilities

Front 3

Acid-test ratio - Calculation:

Back 3

Acid test ratio = (cash equivalents + marketable securities + Net receivables)/Current liabilities

Front 4

Cash ratio - calculation:

Back 4

Cash ratio = (Cash equivalents + Marketable Securities)/Current Liabilities

Front 5

Accounts receivable turnover - Formula (STAR):

Back 5

Accounts receivable turnover = Net credit sales/average net receivables

e.g = $1,800,000/[($300,000+$290,000)/2]

Front 6

Accounts receivable turnover in days - Formula (STAR):

Back 6

Accounts receivable turnover in days = Average net receivables/[Net credit sales/365]

AKA

= 365 days/Receivable turnover

Front 7

Total asset turnover - Formula (STAR):

Back 7

Total asset turnover = Net sales /average total assets

e.g. = $1,800,000/[($2,615,000 + $2,450,000)/2]

Front 8

Working Capital Turnover - Formula:

Back 8

Working capital turnover = Sales/Average working capital

e.g. = ($1,800,000/[($715,000-$695,000)+($665,000 - $700,000)]/2) = 240 times

Front 9

Inventory turnover - formula (STAR):

Back 9

Inventory turnover = Cost of Goods Sold/Average inventory

e.g. = $1,000,000/[($290,000 + $275,000)/2]

Front 10

Inventory turnover in days - formula (STAR):

Back 10

Inventory turnover in days = Average inventory/[Cost of goods sold/365]

AKA

= 365 days/Inventory turnover

Front 11

Operating Cycle - Formula:

Back 11

Operating cycle = AR turnover in days + Inventory turnover in days

Front 12

Net Profit Margin - Formula (STAR):

Back 12

Net Profit margin = Net Income/Net Sales

Front 13

Return on total assets - Formula:

Back 13

Return on total assets = Net income/Average total assets

Front 14

DuPont return on assets - Formula:

Back 14

DuPont return on assets = Net profit margin x Total asset turnover

Front 15

Return on investment - Formula:

Back 15

Return on investment = [Net income + Interest expense (1 - Tax rate)]/ Average(Long-term liabilities + Equity)

Front 16

Return on common equity - formula:

Back 16

Return on common equity = (Net income - Preferred dividends)/Average common equity

Front 17

Debt ratio - formula:

Back 17

Debt ratio = Total liabilities/Total assets

Front 18

Times interest earned - formula:

Back 18

Times interest earned = (Recurring income before taxes & interest)/Interest

Front 19

Stent Co. had total assets of $760,000, capital stock of $150,000, and retained earnings of $215,000. What was Stent's debt-to-equity ratio?

Back 19

Equity = Capital stock + Retained earnings = $150,000 + 215,000 = $365,000

Liabilities = Assets - Equity = $760,000 - 365,000 = $395,000

$395,000/$365,000 = 1.08