Financial Metrics and Ratios Review

Fundamental financial ratios, profitability margins, and cash flow formulas derived from the lecture notes.

ROS

$$\frac{\text{Net profit}}{\text{Sales}}$$

Gross profit margin

$$\frac{\text{Gross profit}}{\text{Sales}}$$

EBITDA margin

$$\frac{\text{EBITDA}}{\text{Sales}}$$

Operating profit margin

$$\frac{\text{EBIT}}{\text{Sales}}$$

ROE

$$\frac{\text{Net profit}}{\text{Avg. equity}}$$

ROE (DuPont Formula)

$$\text{ROS} \times \text{Asset turnover} \times \text{Financial leverage}$$

Asset turnover

$$\frac{\text{Sales}}{\text{Avg. assets}}$$

Financial leverage

$$\frac{\text{Avg. assets}}{\text{Avg. equity}}$$

Days receivables

$$360 \times \frac{\text{Avg. A/R}}{\text{Sales}}$$

Days inventories

$$360 \times \frac{\text{Avg. Inventory}}{\text{Cost of sales}}$$

Days payables

$$360 \times \frac{\text{Avg. A/P}}{\text{Cost of sales}}$$

CCC

$$\text{DR} + \text{DI} - \text{DP}$$

EBIT

$$\text{Sales} - \text{Salaries} - \text{Raw materials} - \text{Rent} - \text{Production costs} - \text{Depreciation}$$

Cash flow from operating activities

$$\text{NOPAT} + \text{Depreciation}$$

FCFF

$$\text{CFO} - \text{Change in WCN} - \text{CAPEX}$$

NOPAT

$$\text{EBIT} - \text{taxes on EBIT}$$

Debt-to-Equity

Total Liabilities / Equity