financial statement analysis ratios and formulas (flashcards)

7/23/2019 Financial Statement Analysis Ratios and Formulas (Flashcards)

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MASFinancial Statement

RatiosQ & A

FORMULAS

compiled by Kathleen Suello


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Gross Margin

Measure of protability

Gross MarginSales


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arnings !er Share "#S$

A%ects mar&et price per share asre'ected in the price(earnings ratio

)et *ncome + !referred ,i-idendsA-g. / of #ommon Shares Outstanding


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!rice(arnings Ratio

An inde0 of 1hether a stoc& isrelati-ely cheap or relati-elye0pensi-e in relation to currentearnings.

Mar&et !rice per Sharearnings per Share


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,i-idend 2ield Ratio

Sho1s the return in terms of cashdi-idends being pro-ided by a stoc&.

,i-idends per ShareMar&et !rice per Share


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Return on 3otal Assets

Measures ho1 1ell the assets ha-ebeen employed.

(Net Income + {Interest Exp.X (!"ax #$%

A'erage "otal Assets


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Return on #ommon Stoc&holders4uity

5hen compared to the return ontotal assets6 measures the e0tent to1hich nancial le-erage is 1or&ing

for or against common stoc&holders.

(Net Income )re*erre ,i'iens$A'g. "otal stoc-olers E/0it1 A'erage )re*erre

Stoc-


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7oo& 8alue per Share

Measures the amt. that 1ould bedistributed to common stoc&holdersif all assets 1ere sold 9 theirbalance sheet carrying amts. And ifall creditors 1ere paid o%.

"otal Stoc-olers E/0it1 )re*erre Stoc-2 o* 3ommon sares o0tstaning


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5or&ing #apital

Measures the companys: ability torepay current liabilities using onlycurrent assets.

30rrent Assets 30rrent4ia5ilities


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#urrent Ratio

3est of short term debt(paying ability.

30rrent Assets 6 30rrent4ia5ilities


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Acid(3est Ratio

3est of short( term debt paying ability

1ithout ha-ing to rely on in-entory.

#ash ; Mar&etable Securities ; Accounts Recei-able ;Short term )otes Recei-able

777777777777777777777777777777777777777777777777777777777777

#urrent Liabilities


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Accounts Recei-able 3urno-er

Measures ho1 many times acompanys: accounts recei-able ha-ebeen turned into cash during theyear.

Sales on Acco0ntA'g. AR 5alance


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A-erage #ollection !eriod

Measures the a-erage number ofdays ta&en to collect an accountrecei-able.

#ollection !eriod

89: a1s77777777777777777777

AR "0rno'er


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*n-entory 3urno-er

Measures ho1 many times acompany:s in-entory has been soldduring the year.

#ost of Goods SoldA-g. *n-entory balance


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A-erage Sale !eriod

Measures the a-erage number ofdays ta&en to sell the in-entory onetime.

*n-entory ,ays

89: a1s777777777777777

In'entor1 "0rno'er


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3imes *nterest arned

Measures the company:s ability toma&e interest payments.

E;I"77777777777

Interest Expense


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,ebt(to 4uity Ratio

Measures the amount of assets beingpro-ided by creditors for each dollarof assets being pro-ided by the

stoc&holders

3otal LiabilitiesStoc-olers< E/0it1


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Also called net prot rate6 net protmargin< measures prot percentageper peso sales

Return on Sales

Net IncomeNet Sales


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Measures percentage of incomederi-ed from e-ery peso of o1ner:se4uity.

Return on Stoc&holder:s 4uity

. Net Income .A'g. Stoc-olers E/0it1


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Measures the e%ecti-eness of usingtrade credit facility from suppliers.

!ayable 3urno-er

Net 3reit )0rcasesA'g. "rae )a1a5les


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*ndicates the number of days spentbefore paying liabilities tomerchandise suppliers.

!ayable ,ays

. 89= .)a1a5le "0rno'er


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*ndicates the / of times thematerials 1ere used on the a-erageduring the period.

Materials 3urno-er

Materials >seA'g. materials in'entor1


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*ndicates the number of times a-g.5*! in-entories is con-erted tonished goods.

5*! 3urno-er

3ost o* Goosman0*act0re

A'g. ?I) in'entor1


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*ndicates the number of times a-g.nished goods is sold during theperiod.

*n-entory turno-er hehe

Finished Goods *n-entory

3ost o* Goos SolA'g. Finise Goos In'entor1


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Measures the ability of the businessto meet operating e0pensespayments gi-en a particular cashbalance.

#ash 3urno-er

3as @peratingexpenses

A'g. 3as ;alance


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*ndicates the / of days spent beforemeeting operating e0pensepayments.

,ays to pay Operating 0p.

. 89= .3as "0rno'er


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Measures the ade4uacy and e%ecti-euse of 1or&ing capital< indicates thereasonableness of the amount ofcurrent assets.

5or&ing #apital 3urno-er

Net SalesA'g. ?or-ing 3apital


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Measures the e%ecti-eness of assetutili=ation.

Assets 3urno-er

Net SalesA'g. "otal Assets


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*ndicates the reasonableness of theamount of current assets.

#urrent Assets 3urno-er

Net Sales excl0ing,epn. & Amort.

A'g. 30rrent Assets


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Measures the number of daydefensi-e assets are a-ailable tomeet daily cash e0penses. ,efensi-eassets include cas mar-eta5lesec0rities an trae recei'a5les.

,efensi-e(*nter-al Ratio

,e*ensi'e AssetsA'g. ,ail1 Expenit0res


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Measures the number of times prot1ill increase or decrease in relationto change net sales.

,egree of operating le-erage

Operating Le-erage

3ontri50tion MarginE;I"


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Measures the ade4uacy of currentearnings to meet preferred di-idends

re4uirements.

3imes !referred ,i-idend arned

Net Income)re*erre ,i'ien

Re/0irements


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#ollection period > A-g. #ollectionperiod

*n-entory ,ays > A-g. Sale !eriod

Measures the speed of the businesscycle< the / of days cash 1asin-ested in the normal businesso erations until it 1as reco-ered

Operating 3urno-er

3ollection )erio +In'entor1 ,a1s


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Measures the relati-e share ofcreditors o-er the total resources ofthe rm.

,ebt(to(Assets Ratio

"otal e5t"otal Asset


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4uity Ratio Measures the amount of resources

pro-ided by the o1ners of the rm.

4uity(to(Assets Ratio

Net Stoc-olers E/0it1"otal Assets


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*ndicates the number of timeso1ner:s e4uity is multiplied.

4uity Multiplier

"otal Assets (E/0it1$Net Stoc-olers E/0it1


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Measures the ris& associated in usingdebt to nance in-estments.

Financial Le-erage

. E;I" .E;I"! interest exp pre*erre

i'iens 5B tax


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Measures the o-erall le-erage of thebusiness6 it indicates the -ariabilityof stoc&holders e4uity 1ith respect to

changes incontri50tion marginE;I" interest expense anpre*erre i'iens 5e*ore tax.

3otal Le-erage

,egree o* operating le'eragex

,egree o* Cnancial le'erage


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Measures the ability to meet 0edcharges by cash.

0amples of Cxe carges?

! rent ! taxes ! ins0rance ! epreciation

Fi0ed #harges Rate

3as Dos 5e*ore Cxe carges"otal Cxe carges


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A rough estimate of the rm:s abilityto meet interest payments tocreditors.

3otal Assets(to(3otal Liabilities Ratio

"otal Assets"otal 4ia5ilities


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Sho1s the capability to meet non(current liabilities using non(currentresources.

)oncurrent Assets(3o(Long termLiabilities Ratio

Non!30rrent Assets4ong!"erm 4ia5ilities


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#ash Flo1 Ade4uacy

3as From @perations4ong!"erm ,e5t )ai + )0rcases

o* Assets


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Long(3erm ,ebt !ayment

4ong!"erm ,e5t )a1ments3as From @perations


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,i-idend !ayout on #ash fromOperations

,i'iens3as *rom @perations


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Rein-estment

)0rcase o* Assets3as *rom @perations


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3otal ,ebt #o-erage

"otal 4ia5ilities3as *rom @perations


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,epreciation(Amorti=ation *mpact

,epreciation + Amortiation3as *rom @perations


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#ash Flo1 to )et *ncome

3as *rom @perationsIncome *rom @rinar1

@perations


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#ash Flo1 Return on Sales

3as *rom @perations"otal Assets


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financial statement analysis ratios and formulas (flashcards)

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