Financial Ratios and Metrics

Vocabulary flashcards detailing core financial ratios, formulas, measurement targets, and units from the lecture material.

Gross Profit Margin

A profitability ratio calculated as $\text{Gross Profit} \div \text{Revenue}$. It measures how much revenue remains after COGS and is expressed as a percentage.

Operating Profit Margin

A profitability ratio calculated as $\text{Operating Income} \div \text{Revenue}$. It measures profitability from core operations before interest and taxes and is expressed as a percentage.

EBIT Margin

A profitability ratio calculated as $\text{EBIT} \div \text{Revenue}$. It measures operating profitability before interest and taxes and is expressed as a percentage.

EBITDA Margin

A profitability ratio calculated as $\text{EBITDA} \div \text{Revenue}$. It measures operating profitability before D&A, interest and taxes and is expressed as a percentage.

Net Profit Margin

A profitability ratio calculated as $\text{Net Income} \div \text{Revenue}$. It measures how much revenue ultimately becomes net profit and is expressed as a percentage.

ROA (Return on Assets)

A profitability ratio calculated as $\text{Net Income} \div \text{Average Total Assets}$. It measures how efficiently assets generate profit and is expressed as a percentage.

ROE (Return on Equity)

A profitability ratio calculated as $\text{Net Income} \div \text{Average Shareholders' Equity}$. It measures return generated on shareholders' invested capital and is expressed as a percentage.

ROIC (Return on Invested Capital)

A profitability ratio calculated as $\text{NOPAT} \div \text{Average Invested Capital}$. It measures how efficiently capital invested in the business generates after-tax operating profit and is expressed as a percentage.

Return on Capital Employed (ROCE)

A profitability ratio calculated as $\text{EBIT} \div \text{Capital Employed}$. It measures return generated by the capital used in the business and is expressed as a percentage.

Return on Sales (ROS)

A profitability ratio calculated as $\text{Operating Income} \div \text{Revenue}$. It measures operating profit generated per dollar of sales and is expressed as a percentage.

Current Ratio

A liquidity ratio calculated as $\text{Current Assets} \div \text{Current Liabilities}$. It measures ability to cover short-term obligations with short-term assets and is expressed as $x$.

Quick Ratio

A liquidity ratio calculated as $(\text{Cash} + \text{Marketable Securities} + \text{A/R}) \div \text{Current Liabilities}$. It measures ability to meet short-term obligations using highly liquid assets and is expressed as $x$.

Cash Ratio

A liquidity ratio calculated as $(\text{Cash} + \text{Marketable Securities}) \div \text{Current Liabilities}$. It measures ability to pay current liabilities using cash and near-cash assets and is expressed as $x$.

Working Capital

A liquidity metric calculated as $\text{Current Assets} - \text{Current Liabilities}$. It measures short-term operating liquidity and is expressed in dollars.

Net Working Capital Ratio

A liquidity ratio calculated as $(\text{Current Assets} - \text{Current Liabilities}) \div \text{Revenue}$. It measures working capital relative to sales and is expressed as a percentage.

Debt-to-Equity Ratio

A leverage ratio calculated as $\text{Total Debt} \div \text{Shareholders' Equity}$. It measures debt financing relative to equity financing and is expressed as $x$.

Debt Ratio

A leverage ratio calculated as $\text{Total Debt} \div \text{Total Assets}$. It measures percentage of assets financed by debt and is expressed as a percentage.

Equity Ratio

A leverage ratio calculated as $\text{Total Equity} \div \text{Total Assets}$. It measures percentage of assets financed by equity and is expressed as a percentage.

Debt-to-Capital Ratio

A leverage ratio calculated as $\text{Total Debt} \div (\text{Debt} + \text{Equity})$. It measures proportion of capital financed by debt and is expressed as a percentage.

Equity-to-Capital Ratio

A leverage ratio calculated as $\text{Equity} \div (\text{Debt} + \text{Equity})$. It measures proportion of capital financed by equity and is expressed as a percentage.

Financial Leverage Ratio

A leverage ratio calculated as $\text{Average Total Assets} \div \text{Average Equity}$. It measures degree to which assets are financed through equity vs. other financing and is expressed as $x$.

Net Debt-to-EBITDA

A leverage ratio calculated as $\text{Net Debt} \div \text{EBITDA}$. It measures debt burden relative to operating earnings and is expressed as $x$.

Debt-to-EBITDA

A leverage ratio calculated as $\text{Total Debt} \div \text{EBITDA}$. It measures total debt relative to EBITDA and is expressed as $x$.

Interest Coverage Ratio

A leverage ratio calculated as $\text{EBIT} \div \text{Interest Expense}$. It measures ability to cover interest payments from operating profit and is expressed as $x$.

EBITDA Interest Coverage

A leverage ratio calculated as $\text{EBITDA} \div \text{Interest Expense}$. It measures ability to cover interest using EBITDA and is expressed as $x$.

Cash Flow Coverage Ratio

A leverage ratio calculated as $\text{Operating Cash Flow} \div \text{Total Debt}$. It measures ability to service debt using operating cash flow and is expressed as $x$.

Asset Turnover Ratio

An efficiency ratio calculated as $\text{Revenue} \div \text{Average Total Assets}$. It measures how efficiently assets generate sales and is expressed as $x$.

Fixed Asset Turnover

An efficiency ratio calculated as $\text{Revenue} \div \text{Average Fixed Assets}$. It measures how efficiently fixed assets generate sales and is expressed as $x$.

Inventory Turnover

An efficiency ratio calculated as $\text{COGS} \div \text{Average Inventory}$. It measures how many times inventory is sold/replaced and is expressed as $x$.

Accounts Receivable Turnover

An efficiency ratio calculated as $\text{Revenue} \div \text{Average A/R}$. It measures how many times receivables are collected during the period and is expressed as $x$.

Accounts Payable Turnover

An efficiency ratio calculated as $\text{COGS} \div \text{Average A/P}$. It measures how quickly the company pays suppliers and is expressed as $x$.

Working Capital Turnover

An efficiency ratio calculated as $\text{Revenue} \div \text{Average Working Capital}$. It measures how efficiently working capital generates sales and is expressed as $x$.

Days Sales Outstanding (DSO)

A days ratio calculated as $\text{Average A/R} \div \text{Revenue} \times 365$. It measures average number of days customers take to pay.

Days Inventory Outstanding (DIO)

A days ratio calculated as $\text{Average Inventory} \div \text{COGS} \times 365$. It measures average number of days inventory remains outstanding.

Days Payable Outstanding (DPO)

A days ratio calculated as $\text{Average A/P} \div \text{COGS} \times 365$. It measures average number of days company takes to pay suppliers.

Cash Conversion Cycle (CCC)

A days ratio calculated as $\text{DSO} + \text{DIO} - \text{DPO}$. It measures number of days cash is tied up in the operating cycle.

Operating Cycle

A days ratio calculated as $\text{DSO} + \text{DIO}$. It measures time from purchasing inventory to collecting cash from customers.

Operating Cash Flow Ratio

A cash flow ratio calculated as $\text{Operating Cash Flow} \div \text{Current Liabilities}$. It measures ability to cover current liabilities with operating cash flow and is expressed as $x$.

Cash Flow Margin

A cash flow ratio calculated as $\text{Operating Cash Flow} \div \text{Revenue}$. It measures how much sales are converted into operating cash flow and is expressed as a percentage.

Cash Return on Assets

A cash flow ratio calculated as $\text{Operating Cash Flow} \div \text{Average Total Assets}$. It measures cash generated relative to assets and is expressed as a percentage.

Cash Return on Equity

A cash flow ratio calculated as $\text{Operating Cash Flow} \div \text{Average Equity}$. It measures operating cash generated relative to equity and is expressed as a percentage.

Free Cash Flow Margin

A cash flow ratio calculated as $\text{Free Cash Flow} \div \text{Revenue}$. It measures percentage of revenue converted into FCF and is expressed as a percentage.

FCF Conversion

A cash flow ratio calculated as $\text{Free Cash Flow} \div \text{EBITDA}$. It measures how much EBITDA converts into free cash flow and is expressed as a percentage.

Earnings Per Share (EPS)

A valuation ratio calculated as $\text{Net Income Available to Common Shareholders} \div \text{Weighted Average Shares}$. It measures earnings attributable to each common share and is expressed as $\text{\$/share}$.

Price-to-Earnings (P/E)

A valuation ratio calculated as $\text{Share Price} \div \text{EPS}$. It measures how much investors pay for each dollar of earnings and is expressed as $x$.

Price-to-Sales (P/S)

A valuation ratio calculated as $\text{Market Capitalization} \div \text{Revenue}$. It measures market value relative to sales and is expressed as $x$.

Price-to-Book (P/B)

A valuation ratio calculated as $\text{Market Capitalization} \div \text{Book Value of Equity}$. It measures market value relative to accounting equity and is expressed as $x$.

EV/EBITDA

A valuation ratio calculated as $\text{Enterprise Value} \div \text{EBITDA}$. It measures enterprise value relative to operating earnings and is expressed as $x$.

EV/EBIT

A valuation ratio calculated as $\text{Enterprise Value} \div \text{EBIT}$. It measures enterprise value relative to EBIT and is expressed as $x$.

EV/Revenue

A valuation ratio calculated as $\text{Enterprise Value} \div \text{Revenue}$. It measures enterprise value relative to sales and is expressed as $x$.

Dividend Yield

A valuation ratio calculated as $\text{Annual Dividend per Share} \div \text{Share Price}$. It measures cash dividend return relative to share price and is expressed as a percentage.

Dividend Payout Ratio

A valuation ratio calculated as $\text{Dividends} \div \text{Net Income}$. It measures percentage of earnings distributed to shareholders and is expressed as a percentage.

Retention Ratio

A valuation ratio calculated as $\text{Retained Earnings} \div \text{Net Income}$. It measures percentage of earnings retained in the business and is expressed as a percentage.

Revenue Growth

A growth ratio calculated as $(\text{Current Revenue} - \text{Prior Revenue}) \div \text{Prior Revenue}$. It measures growth in sales and is expressed as a percentage.

EBITDA Growth

A growth ratio calculated as $(\text{Current EBITDA} - \text{Prior EBITDA}) \div \text{Prior EBITDA}$. It measures growth in EBITDA and is expressed as a percentage.

EBIT Growth

A growth ratio calculated as $(\text{Current EBIT} - \text{Prior EBIT}) \div \text{Prior EBIT}$. It measures growth in operating income and is expressed as a percentage.

Net Income Growth

A growth ratio calculated as $(\text{Current NI} - \text{Prior NI}) \div \text{Prior NI}$. It measures growth in net income and is expressed as a percentage.

EPS Growth

A growth ratio calculated as $(\text{Current EPS} - \text{Prior EPS}) \div \text{Prior EPS}$. It measures growth in earnings per share and is expressed as a percentage.

CAGR

Compound annual growth rate calculated as $(\text{Ending Value} \div \text{Beginning Value})^{(1/n)} - 1$. Expressed as a percentage.

DuPont ROE

Calculated as $\text{ROE} = \text{Net Profit Margin} \times \text{Asset Turnover} \times \text{Financial Leverage}$. It measures the three major drivers of ROE: profitability, asset efficiency, and financial leverage.

5-Step DuPont ROE

Calculated as $\text{ROE} = \text{Tax Burden} \times \text{Interest Burden} \times \text{EBIT Margin} \times \text{Asset Turnover} \times \text{Financial Leverage}$. It measures detailed drivers of shareholder returns.