Financial Ratio Equations

Financial Ratio Equations - CFA CFA Level II Study this set online at: http://www.cram.com/flashcards/financial-ratio-equations-c http://www.cram.com/flashcards/financial-ratio-equations-c… …

Current Ratio

Current Assets / Curr Current Liabilities Liabilit ies

Quick Ratio

(Cash + S-T Investments + Receivables) Receivables) / Current Liabilities

Cash Ratio

(Cash + S-T Investments) / Current Liabilities

Defensive Interval Ratio

(Cash + S-T Investments + Receivables) Receivables) / Daily Cash Expenditures

Receivables Tur Turnover nover

Total Total Reve Revenue nue / Average Receivables

Days of Sales Outstanding

Number of Days in a period / Receivables Turnover

Inventory Turnover Ratio

COGS / Average verage Inventory

Days of Inventory on Hand

Number of days in a period / Inventory turnover ratio

Financial Ratio Equations - CFA Level II Study this set online at: http://www.cram.com/flashcards/financial-ratio-equations-c…

Payables turnover ratio

Purchases / Average trade payables

Number of days of payables

Number of days in a period / Payables turnover ratio

Cash Conversion Cycle (net operating cycle)

DOH + DSO - Number of days of payables

Working capital turnover ratio

Total revenue / Average working capital

Fixed asset turnover ratio

Total revenue / Average net fixed assets

Total asset turnover ratio

Total revenue / Average total assets

Operating return on Operating Income / Average total assets assets

Return on assets

Net Income / Average total assets


Return on equity

Net Income / Average shareholders' equity

Return on total capital

EBIT / (Interest bearing debt + Shareholders' Equity)

Return on common equity

(Net Income - preferred dividends) / Average common shareholders' equity

Tax burden

Net Income / Earnings before taxes

Interest burden

Earnings before taxes / Earnings before interest and taxes

Financial leverage ratio (equity multiplier)

Average total assets / Average shareholders' equity

Total Debt Debt to assets ratio

Total of interest-bearing S-T and L-T debt, ex liabilities such as accrued expenses and accounts payable

Total debt / Total assets


Total debt / Total Debt to equity ratio shareholders' equity

Debt to Capital ratio

Total debt / (total debt + total shareholders' equity)

Interest Coverage Ratio

Earnings before interest & taxes / Interest Payments

Fixed Charge coverage ratio

(EBIT + lease payments) / (Interest payments + lease payments)

Dividend payout ratio

Common share dividends / Net income attributable to common shares

Retention Rate

(Net Income attributable to common shares - Common share dividends) / (Net Income attributable to common shares) or- 1 - payout ratio

Sustainable growth rate

retention rate x return on equity

Earnings per share

Net Income - preferred dividends / weighted avg # of ordinary shares outstanding


Book Value per share

Common stockholders' equity / total number of common shares outstanding

Free Cash Flow to equity (FCFE)

Cash flow from operations Investment in fixed capital + Net borrowing

Free cash flow to the firm (FCFF)

Cash flow from operations + Interest expense x (1 - tax rate) - Investment in fixed capital * should only add back interest, if it was subtracted to calculate CFFO

Financial Ratio Equations

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