Chapter 2
Current Ratio = Current assets
Current liabilities
Chapter 3
Total Asset Turnover = Sales (or operating revenues)/Average total assets
Return on Assets (ROA) = Net Earnings + Interest Expense (net of tax)
Average Total Assets
Chapter 4
Return on Equity (ROE) = Net Earnings/Average Shareholders’ Equity
Net Profit Margin Ratio = Net Earnings/Net Sales
Chapter 5
Quality of Earnings = Cash Flows from Operating Activities
Net Earnings
Capital Expenditure Ratio = Cash Flows from Operating Activities
Cash Paid for Capital Expenditures
Free Cash Flow = Cash Flows from Operating Activities – Dividends – Cash Paid for Capital Expenditures
Chapter 6
Receivables Turnover Ratio = Net Credit Sales/Average Net Trade Receivables
Average Collection Period = 365/Receivables Turnover Ratio
Gross Profit Percentage = Gross Profit/Net Sales
Chapter 7
Inventory Turnover Ratio = Cost of Sales/Average Inventory
Average Days to Sell Inventory = 365/Inventory Turnover Ratio
Chapter 8
Fixed Asset Turnover Ratio = Net Sales/Average Net Fixed Assets
Chapter 9
Quick Ratio = Quick Assets/Current Liabilities
Accounts Payable Turnover Ratio = Cost of Sales/Average Accounts Payables
Average Age of Payables = 365/Accounts Payable Turnover Ratio
Chapter 10
Times Interest Earned Ratio = (Net Earnings + Interest Expense + Income Tax Expense)
Interest Expense
Debt-to-Equity Ratio = Total Liabilities/Shareholders’ Equity
Chapter 11
Earnings per Share (EPS) = Net Earnings
Average # common shares outstanding
Dividend Yield Ratio = Dividends per share
Market price per share
Chapter 12
DuPont Model:
=
Net Earnings
Net Sales
x
Net Sales
Average Total Assets
x
Average Total Assets
Average Shareholders’ Equity
Cash Ratio = (Cash + Cash Equivalents)/Current Liabilities
Cash Coverage Ratio = Cash Flows from Operating Activities (before Interest & Taxes)/Interest Paid
Financial Leverage Percentage = Return on Equity – Return on Assets
Price Earnings Ratio = Current Market Price per Share/Earnings per Share