-
Vertical common size balance sheet? Vertical common size Income Statement?
Vertically lined up, easy for comparisson. For balance sheet expresses as portion of Total Assets. For Income Statement Expresses as portion of Revenue.
-
Horizontal common size balance sheet? Horizontal common size Income Statement?
Both are relative to proportion of a base year's numbers.
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal ratio:
Receivable Turnover Ratio
Receiver Turnover Ratio = Annual Sales / Average Receivables
Measure of amount of receivables turnover
Ideal is to be with the industry
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Days of Sales Outstanding
365/Receivable Turnover Ratio(Annual Sales/Avg Turnover)
Measures number of days it takes company's customers to pay their bills
Want collection period clost to industry norm. If too high, customers are too slow paying meaning too much capital tied up in assets. Too low means firm's credit policy too rigorous.
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Inventory Turnover
COGS/Average Inventory
Measures efficiency with respect to goods sold.
Activit Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Day of inventory on hand
= 365/ Inventory turnover ratio(COGS/Avg Inventory)
Measures how many days of inventory are on hand
Want industry norm. If too low, will run out of supply. If too high, inventory could become obsolete
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Payable Ratio
=Purchases(End Inventory-beg inventory + COGS)/Average A/P
Measures trade credit
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Number of Days Payable
365/ Payable Ratio
Payable ratio ==Purchases(End Inventory-beg inventory + COGS)/Average A/P
Number of days to pay off company bills
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Total Asset Turnover
Revenue/Average Total Assets
Measures effectiveness of firm's use of its total assets to creat revenue.
Desirable to be industry norm. If too low, might mean company capital tied up in asset base. If too high, firm has too few assets for potential sales or asset base outdated.
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Fixed Asset Turnover
=Revenue/Average net Fixed Assets
Net fixed assets is net of accumulated depreciation.
Low fixed asset turnover mean capital tied up in asset base. Too high might imply firm has obsolete equip. IF equipment is new, ratio is Low.
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Working Capital Ratio
=Revenue/ Average Working Capital
=Workign Capital =(Current Assets - Current Liabilities)
Gives info about how much of reveneu is tied up in working capital. Firms have low working capital, if payables exceed inventory and receivbales In this case this ratio will be very large, and is less informative about changes in firms operating efficinecy.
Activity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Current Ratio
= Current Assets/ Current Liabilities
Higher ratio means more likely able to pay off short term bills. Best known measure of liquidity. Current ratio of less than one means company has negative working capital which is Current Assets minus current liabilities.
Liquidity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Quick Ratio
=Cash+Marketable securities+receivables/current liabilities
Higher this is more likely able to pay. More stringent than current ratio bc excludes inventories and other assets
Liquidity Ratio
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Cash Ratio
Most conservative betwee cash, quick and current ratio.
=cash+marketable securities/current liabilities
does not include other assets, inventory, or receivables.
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Defensive Interval Ratio
Cash+Marketable Securities+Receivables/Average daily expenditures
- indicates number of days of average cash expenditures firm could pay with current liquid assets. Expenditures include cash expenses for costs of goods, SG&A, and R&D. If taken from income statement, non cash charges like depreciation added back like indirect method.
- Liquidity
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:Cash Conversion Cycle
Lenght of time it takes to turn firm cash into inventory back to cash, in form of collection from sale of that inventory.
=Days sales outstanding+Days of inventory on hand-number of days fo payables
High is undesirable
Liquidity
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Debt to Equity
Total Debt/Shareholder Equity
Amt of reliance on debt financing. Total debt is calculated on different circumstances. Long-term debt plus interest -bearing short term debt is usual. Sometimes include present value of lease and/or noo interest bearing short term liabs, like accoutns payable.
Liquidity.
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Debt to Capital Ratio
Debt/ Total Capital
Capital equals all short term and long term debt plus preferred stock and equity
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Debt to Assets
Total Debt/Total Assets
Shows reliance on debt as source of financing
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Financial Leverage
Average total Assets/ Average total Equity
Average means value at begining and end divided by 2. Mroe debt financing increase this leverage.
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Interest Coverage
EBIT/Interest
How well firm can pay debt interest payments.
SOlvency
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Fixed Charge coverage
EBIT+Lease Payments/Interest+Lease Payments
Adding lease payments shows significant lease paymetns reduceds ratio drastically. Fixed charge coverage is more meraningful with companies that lease a large portio of assets, such as airlines.
Solvency
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Net Profit Margin
Net income/Revenue. Should not worry about below line items that wont affect company in future
Profitability ratio
-
Gross Profits
Operating Profit
Net Income
Total Capital 2 Ways
- Gross Profits - Sales-COGS
- Operating Profit = EBIT
- Net Income =Earnings after taxes before dividends
- Total Capital 2 Ways= Long term debt+Short term interst bearing debt+prefered stock+comon equity
- also:
- Total Assets
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Gross Profit Margin
Gross Profit (Sales-COGS)/Revenue
Profitablility
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:Operating Profit Margin
EBIT/Revenue or Operating Income/Revenue
does include non operating items such as gains on investments. Some formulas take them out, some do.
Profitablitiy
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:Pre tax margin
EBT/Revenue
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:ROA.
Net income/ Avg total assets. Also bc total assets includes debt and equity, the interest expense that was paid otu to investors without getting taxed should be added back to net income, but taxed. Therefore can also be Net income+((1-tax)(Interest Expense)/ Avg total assets
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:
Operating return on Assets
Operating Income/Average total assets or EBIT/Average total Assets
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Return on total capital
EBIT/AVG total capital. Analysts should be concerned if this ratio is too low.
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state:Return on Equity
Net Income/Average total equity
-
For Below Ratio, name which grouping of ratio it fits into, what the equation is, what it means, and what is ideal state: Return on common equity
- =Net Income-Prefered Dvidinds/Average Common Equity
- Shows return on equity to common stock shareholders.
-
Dupont Original Formula
ROE = (Financial Leverage)x(Asset Turnover)x(Net Profit Margin)
- Fin lev = Assets/Equity
- Asset Turnover = Revenue/Asset
- Net Profit Margin = Net Income/Revenue
-
Extended Dupont Equation
- ROE = (Financial Leverage)x(Asset Turnover)x(Interest Burden)x(Operating Margin)x(Tax burden)
- Fin lev = Assets/EquityAsset
- Turnover = Revenue/Asset
- Operating Margin = Operating Income/Revenue
- Interest Burden = EBT/EBIT
- Tax Burden = Net Income/EBT or 1-Tax Rate
-
Sustainable Growth Rate?Equation?
Proportion of a firm's net income retained to fund growth.
Equation is g=ROExRetention Rate
Retention Rate = Net Income to common Investors - Dividends/ Net income availabe to common
Retention rate also equals 1-Dividend payout ratio = 1-Dividends Declared/Net Income available to common
|
|
