financial ratios and formulas for analysis
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Financial Ratio & Formulas
Activity Ratios:
ReceivablesTurnover= Annual SalesAverage Receivables
Daysof sales outstanding= 365Receivables Turnover
Inventory Turnover=Cost of goods soldaverage inventory
Daysof inventory onhand= 365inventory turnover
PayablesTurnover= PurchasesAveragetrades payable
No .of daysof payables= 356payablesturnover ratio
Total asset turnover= RevenueAverage totalassets
¿asset Turnover= RevenueAverage net ¿
asset ¿
Working capitalTurnover= RevenueAverageworking capital
Liquidity Ratio:
Current Ratio= Current AssetCurrent Liabilities
Quick Ratio=Cash+Marketable securities+ReceivablesCurrent Liabilities
Cash Ratio=Cash+Marketable SecuritiesCurrent Liabilities
Defensive Internal=Cash+Marketable securities+ReceivablesAverage daily expenditure
CashConversionCycle=( Daily SalesOut standing)+(Daysof inventoryonhand )−(Number of daysof payable )
Solvency Ratios:
Debt−¿−Equity= Total Debt
Total Shareholder ' s Equity
Debt−¿−Capital= Total Debt
Total Debt+Total Shareholde r ' s Equity
Debt−¿−Asset= Total DebtTotal Assets
Financial Leverage= AverageTotal AssetsAverageTotal Equity
Interest Coverage=Earnings before interets∧taxesInterest Payments
¿ChargeCoverage= Earnings before interest∧taxes+Lease PaymentsInterest Payments+Lease Payments
Profitability Ratios
Net Profit Margin= Net IncomeRevenue
Gros s Profit Margin=Gross ProfitRevenue
Operating Profit Margin=Operating IncomeRevenue
∨ EBITRevenue
PretaxMargin= EBTRevenue
Returno n Asset (ROA )= Net IncomeAverageTotal Assets
Returnon Asset (ROA )=Net Income+ Interest expense (1−tax rate )AverageTotal Assets
Operating Returnon Assets= Operating IncomeAverageTotal Assets
∨ EBITAveragetotal Assets
ReturnonTotal Capital= EBITAverageTotal Capital
Returnon Equity= Net IncomeAverage Total Equity
Returnon Equity= Net Income−Preferred DevidendAverageCommonEquity
=Net Incomeavailable ¿Common ¿AverageCommonEquity
Free Cash Flow to Firm:
FCFF=Net Income+Noncashcharge+ [Interest expense× (1−Tax rate ) ]−¿Capital Investment−WorkingCapital Investment
FCFF=Cash Flow ¿Operations+[ Interest expense× (1−Tax rate ) ]−¿Capital Investmen t
Free Cash Flow from Equity:
FCFE=CashFlow ¿Operations−¿Capital Investment+Net Borrowing
Common−¿ncome Statement Ratios= IncomeStatement AccountSales
Common−¿ alance Sheet Ratios=Balance Sheet AccountTotal Assets
Original DuPont Equation :ROE=(Net Pro fitMargin )( AssetTurnover)(LeverageRatio )
Extended DuPont Equation :
ROE=( Net IncomeEBT )( EBTEBIT )( EBITRevenue )( Revenue
Total Assets )( Total AssetsTotal Equity )
Basic EPF= Net Income−Preferred DividendsWeightedaverage no .of common sharesoutstanding
Diluted EPS=
(Net Income−PrefferedDividend )+(ConvertiblePreferreddividend )+(ConvertibleDebt
Interest ) (1−t )
(WeightedAverageShares )+(Shares¿ ¿Conversionof ¿Conv . pfd .Shares ¿)+(Shares¿ ¿Conversion of ¿Conv . Debt¿)+( Sharesissuable
¿¿StockOption¿)
Coefficients of Variation:
CV Sales= Standard Deviationof SalesMean Sales
CV Operating Income=Standard Deviationof operating IncomeMeanOperating Income
CV of Net Income=Standard Deviationof net incomeMean Net Income
Inventories:
Ending Inventory=Beginning Inventory+Purchases−COGS
Current Cost of Inventory (FIFO )=LIFO Inventory+LIFO reserve
COGSFIFO=COGSLIFO−(Ending LIFOreserve−beginning LIFO reserve)
Long-Lived Assets:
Straight−LineDepreciation=Cost−SalvageValueUseful Life
DDBDepreciation=( 2Useful Life ) (Cost−Accumulated Depreciation )
Average Age∈Years= Accumulated DepreciationAnnual Depreciation Expence
Averageage asa Percentage= AccumulatedDepreciationEndingGross Investment
AverageDepreciable Life= EndingGross InvestmentAnnual Dep reciation Expense
RemainingUseful Life= Ending Net InvestmentAnnual Depreciation Expense
Deferred Taxes:
IncomeTax Expense=Taxes Payable+∆ DTL−∆ DTA
Debt Liabilities
Interes Expense=(the Market Rateat Issue )×( theBalance Sheet valueof the Liability at
the beginningof thePeriod)Performance Ratios
Ca sh flow−¿−Revenue= CFONet Revenue
Cash return−on−Asset= CFOAverageTotal Assets
Cash return−on−Equity= CFOAverageTotal Equity
Cash−¿−Income= CFOOperating Income
Cash flow per Share= CFO−Preferrence DividendsWeighted average no .of CommonShares
Coverage Ratios
Debt Coverage= CFOTotal Debt
Interest Coverage=CFO+ Interest Paid+TaxesPaidInterest Paid
Reinvestment= CFOCash Paid for LongTerm Assets
Debt Repayment= CFOCash for LongtermDebt Repayment
Dividend Payments= CFODividends Paid
Investing∧Financing= CFOCashOutflows ¿
Investing∧Financing Activities ¿
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