Exam 3 Formulas - sales / average Plant and Equip. Days in...

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Most American merchandising and manufacturing companies have ROI between 8-12% Three ways to improve ROI -increase sales prices -decrease expenses -lower invested capital The Rate of Return analysis is often used in the decision making process when choosing between two competing solutions Residual income encourages managers to make profitable investments that would be rejected by managers using ROI LIFO and FIFO make it hard to compare firms Both ROI and ROE should be based on operating income rather than net income About 98% of major Corporations use the indirect method for Statement of Cash Flow Equations Turnover = sales / average assets AR turnover = sales / average AR INV turnover = Cost of Goods Sold / Average Inventory Plant and Equip. turnover =
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Unformatted text preview: sales / average Plant and Equip. Days in AR = AR / (Annual Sales / 365 days) Days in INV = INV / (Cost of Goods Sold / 365 Days) P/E ratio = Market Price per Share / Diluted Earnings per Share Dividend Yield = Dividends Per Share / Market Price per Share Dividend Payout = Annual Dividend Per Share / Earnings Per Share Preferred Dividend Coverage Ratio = Net Income / Annual Preferred Dividend Debt Ratio = Total Liabilities / (Total Liabilities + Owners Equity) Debt/Equity Ratio = Total Liabilities / Total Owners Equity Times Interest Earned = EBIT / Interest Expense ---- measure of the ability of a firm to provide protection to the long-term creditor Selling Price = Cost of Product / (1-GP rate)...
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This note was uploaded on 12/17/2010 for the course STAT 420 taught by Professor Stepanov during the Spring '08 term at University of Illinois, Urbana Champaign.

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Exam 3 Formulas - sales / average Plant and Equip. Days in...

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