ActSc 371_Lecture 4_Handout Formulas

ActSc 371_Lecture 4_Handout Formulas - Gross profit margin...

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ActSc 371 – Lecture 4 Handout Instructor: Dr. Lysa Porth HANDOUT: Useful Financial Ratios (Ross et al. 2011) SHORT–TERM SOLVENCY RATIOS Current ratio = Current assets ÷ Current liabilities Quick ratio = (Current assets – Inventory) ÷ Current liabilities ACTIVITY RATIOS Total asset turnover = Total operating revenues ÷ Average total assets Receivables turnover = Total operating revenues ÷ Average receivables Average collection period = Days in period ÷ Receivables turnover Inventory turnover = Cost of goods sold ÷ Average inventory Days in inventory = Days in period ÷ Inventory turnover FINANCIAL LEVERAGE RATIOS Debt ratio = Total debt ÷ Total assets Debt–equity ratio = Total debt ÷ Total equity Equity multiplier = Total assets ÷ Total equity Interest coverage = Earnings before interest and taxes ÷ Interest PROFITABILITY RATIOS Net profit margin = Net income ÷ Total operating revenue
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Unformatted text preview: Gross profit margin = Earnings before interest and taxes ÷ Total operating revenues Net return on assets = Net Income ÷ Average Total Assets Gross return on assets = Earnings before interest and taxes ÷ Average total assets Net[Gross] Return on assets (ROA) = Net[Gross] Profit margin x Asset Turnover Return on equity (ROE) = Net income ÷ Average stockholders' equity Payout ratio = Cash dividends ÷ Net Income Retention ratio = Retained earnings ÷ Net Income = 1 – Payout ratio MARKET VALUE RATIOS Price–to–earnings (P/E) ratio = Market price per share ÷ Earnings per share Dividend yield = Dividend per share ÷ Market price per share Market–to–book (M/V) ratio = Market price per share ÷ Book value per share Tobin's Q ratio = (Market value of debt + equity) ÷ Replacement value of total assets...
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This note was uploaded on 02/08/2012 for the course ACTSC 371 taught by Professor Wood during the Fall '08 term at Waterloo.

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