Chapter 3 Ratios/Equations

Part 1 of final exam equatio

Current Ratio

= Current assets / Current liabilities

(answer in x)

Quick Ration (ACID test)

= (Current assets - Inventories) / Current Liabilities

(answer in x)

Working capital ratio

= Net working capital / Sales

also = (Current assets - Current liabilities) / Sales

(answer in %)

Cash Ratio

= Cash and Cash equivalents(ex: marketable securities) / Total assets

(answer in %)

Accounts Receivable Turnover Ratio

= Net Sales / Accounts Receivables

also = Annual Credit Sales / Accounts Receivables

(answer in x)

Days’ Sales Outstanding

= 365 days / Receivables turnover

(answer is in days)

Average Collection Period (ACP)

= Accounts Receivables / (Annual credit sales / 365 days)

(answer in days)

Inventory Turnover Ratio

= Cost of goods sold / Inventory

(answer in x)

Days’ Sales In Inventory

= 365 days / Inventory

(answer is in days)

Fixed Assets Turnover Ratio

= Sales / Net fixed assets

(answer in x)

Total Assets Turnover Ratio

= Sales / Total Assets

(answer in x)

Debt Ratio

= (Total liabilities or Total debt) / Total assets

(answer in x)

Debt to Equity Ratio

= Total Debt / Total Equity

(answer in x)

Equity Multiplier

= Total Assets / Stockholders’ Equity

(answer in x)

Times Interest Earned

= (EBIT or Operating Income) / (Interest Charges or Annual Interest expense)

(answer in x)

Gross Profit Margin Ratio

= (Sales - COGS) / Sales

also = Gross Profit / Sales

(answer in %)

Operating Profit Margin Ratio

= Operating Profits / Sales

(operating profits = EBIT earnings before interest and taxes)

(answer in %)

Net Profit Margin Ratio

= Net income before extraordinary items / Sales

(answer in %)

ROA (Return on Assets = ROI)

= Net Income / Total Assets

(net income = earnings after taxes)

(answer in %)

Earning Power

= EBIT / Total Assets

(answer in %)

ROE (Return on Equity)

= Net Income / Stockholder Equity

(net income = earnings after taxes)

(answer in %)

EPS (Earnings Per Share)

= Net Income / # of shares of common stock outstanding

(answer in $)

P/E (Price to Earnings)

= Market price per share / EPS

(answer in x)

Dividend yield

= Dividend per share / Market price per share

(answer in %)

Market/Book ratio

= Market price per share / Book value per share

(answer in x)