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33 Cards in this Set

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Gross Margin = (Sales-CGS)/Sales
Shows the relation between sales price and cost of product sold. Closely watched for any company with significant levels of inventory, such as retailers. It is one of the three main margin numbers.
Cost Ratio = CGS/Sales
Compliment to gross margin, also showing the relation between sales price and cost of product sold.
EBIT = Sales-CGS-SG&A-R&D-Depreciation
Also referred to as Operating Income, it is the core income that the firm produces in its main line of business.
EBIT Margin = EBIT/Sales
Also referred to as Operating Margin, it is one of the three main margin numbers.
Profit Margin = NI/Sales
This is common sized net income. It is sometimes called "Return on Sales." Shows how many pennies of each dollar of sales made it all the way to net income. It is one of the three main margin numbers.
Asset Turnover (End) = Sales/Ending Total Assets
This shows how many dollars of sales are generated for each dollar of assets.
Asset Turnover (Ave) = Sales/Average Total Assets
Shows how many dollars of sales are generated for each dollar of assets, but uses the average of total assets from different years, especially in the case that assets change significantly from year to year.
Accounts Receivable Turnover = Sales/Accounts Receivable
This measures how many times in the reporting cycle the firm collected its receivables.
Days Sales Outstanding = 365/Accounts Receivable Turnover
Measures how many days, on average, it takes for the firm to collect its receivables.
Inventory Turnover = CGS/Inventory
This measures the number of times during the year that the firm sold its inventory.
Days Sales in Inventory = 365/Inventory Turnover
Measures the number of days, on average, it takes for the firm to sell its inventory.
Purchases = Ending Inventory+CGS-Beginning Inventory
Purchases can be found by looking at the journey entry, but can also be calculated using this equation.
Accounts Payable Turnover = Purchases/Accounts Payable
Measures the number of times per year the firm pays its vendors (suppliers of inventory).
Days Payable Outstanding = 365/Accounts Payable Turnover
The number of days, on average, it takes for a firm to pay its vendors.
Leverage = Assets/Equity
This shows how the firm is financed (more debt financed or more equity financed?). Measures how much the firm has in assets for each dollar of equity.
Return on Equity = ROE = NI/Equity
Relates the earnings of the firm to owner's equity, and is a very popular performance measure.
Return on Equity = ROE = Profit Margin * Asset Turnover * Leverage = (NI/Sales)*(Sales/Assets)*(Assets/Equity)
DuPont Meathod of breaking down ROE. It is useful to "drill down" into how a firm achieved a certain ROE and how it can improve.
Current Ratio = Current Assets/Current Liabilities
This is a liquidity measure. Shows how easily the firm will be able to cover its short term obligations.
Quick Ratio = Liquid Current Assets (cash, receivables, etc)/Current Liabilities
Focuses on the most liquid assets' availability to cover the current liabilities.
Debt to Capital = Debt/(Debt+Capital)
This shows how the firm is financed. It is another ratio that measure leverage.
Interest Coverage = EBIT/Interest Expense
This shows how well the firm can cover its interest charges from core, operating income. Bondholders and bankers want this ratio to be relatively high; the higher the ratio, the great the assurance that they will be paid their interest.
Dividend Payout = Dividends/NI
A way for a firm to state their dividend policy in terms of a percentage of earnings that they wish to payout on an ongoing basis.
Effective Tax Rate = Tax Expense/Pretax Income
Is often the same, but sometimes differs from the statutory tax rate.
NOPAT = Net Operating Profit After Tax = EBIT*(1-Effective Tax Rate)
This is EBIT, or operating income, after-tax.
ROIC = Return on Invested Capital = NOPAT/(Ending book values of all interest bearing debt + Owners' Equity)
Measures the accounting returns to all suppliers of capital, both debt and equity. It is a parallel measure to ROE, however ROE measures the accounting returns attributable only to stockholders.
Cost of Debt Financing = Effective Interest Rate After Tax = Interest Expense * (1-Effective Tax Rate)/Interest Bearing Debt
Measures debt financing, which is in essence subsidized by the government because corporations receive a tax shield from interest.
Debt to Equity = Interest Bearing Debt/Owners' Equity
This is a measure of the financial leverage or the degree to which the firm using fixed rate debt financing.
Market Capitalization = Price per Share * Number of Shares Outstanding
Shows the value of the equity at any given point in time.
Market to Book Ration = Market Capitalization/Book Value of Equity
This ratio of market value (which represents a sort of "average" value of the stock across all stockholders) to book value highlights the discrepancy between firm value as determined by market participants and that according to accounting rules.
Dividends per Share = Dividends Paid/Number of Shares Outstanding
This figure, measuring the amount of dividends paid per share, is an often cited descriptor of a firm. If lower than last year, it sends strong negative signals to the market. If much higher than last year, the firm is essentially locking themselves into that higher dividend for an extended period of time.
Total Return to Shareholders = (Current Price per Share - Previous Price per Share + Dividend per Share)/Previous Price per Share
This shows how the firm as performed in the recent past for its shareholders in terms of increasing the value of their investment.
Dividend Yield = Dividend per Share/Price per Share
This measure the amount of cash dividend return on a current investment in the stock.
Cost of Equity = Risk Free Rate of Interest + (Beta*Risk Premium)
A guess based on risk. A beta of 3 is not unusual for some high tech firms. A beta of 0.4 is not unusual for a utility firm.