FI 320 Midterm Equations

Current Ratio

CA / CL
Tells us the short-term liquidity of the firm

Total Asset Turnover (TAT)

Sales / Assets
Tells us how effective were we at selling our assets

Equity Multiplier (EM)

Total Assets / Total Equity
Tells us how much we were able to leverage our equity to buy assets

Return on Assets (RoA)

Net Income / Total Assets
A measure of profit per dollar of asset

Return on Equity (RoE)

Net Income / Total Equity
Shows us how stockholders fared
Profit Margin
Total Asset Turnover
Equity Multiplier

Profit Margin (PM)

Net Income / Sales
Revenue relative to expenses

Annual Percentage Rate (APR)

APR = Months * rate

Annuity

Multiple cash flows, of the same value, equally spaced

Annuity due

Assumes that there is a cash flow in the beginning also (t=0)

EAR

the more frequent the compounding, the higher the EAR

Sustainable Growth Rate

how much net income will increase if the firm uses retained earnings and only enough debt to keep D/E constant

Internal Growth Rate

how much net income will increase if the firm ONLY uses its retained earnings