FIN 380 Chapter 3

ROE =
return on equity =

(PM)(TAT)(EM)
profit margin
total asset turnover
equity multiplier
or net income / total equity
or (net income / sales)
(sales / assets)
(assets / equity)

debt-equity ratio =
D/E

D/E = EM - 1

Based only on the following information for Bennington Corp., did cash go up or down? By how much?
Decrease in inventory $580
Decrease in accounts payable 190
Increase in notes payable 610
Increase in accounts receivable 210
=

Decrease in inventory - Decrease in accounts payable + Increase in notes payable - Increase in accounts receivable

Net investment in FA =

(NFA end - NFA beg) + Depreciation

current ratio =

CA / CL

NWC =

CA - CL

CA =

NWC + CL

Quick ratio =

(CA ? Inventory) / CL

Profit margin =

Net income / Sales

Net income =

Sales * Profit margin

ROA =
return to assets

Net income / TA

Total assets =

total debt + total equity

ROE =
return to equity

Net income / total equity

Receivables turnover =

Sales / Receivables

Days' sales in receivables =

365 days / Receivables turnover or
365 / inventory turnover

average collection period =

365 days / Receivables turnover

Inventory turnover =

cost of goods sold (COGS) / Inventory

Days' sales in inventory =

365 days / Inventory turnover

On average, a unit of inventory =

365 days / Inventory turnover

Net income =

Addition to RE + Dividends

Earnings per share =

NI / Shares

Dividends per share =

Dividends / Shares

Book value per share =

TE / Shares

Market-to-book ratio =

Share price / book value per share

Price-earnings ratio =

Share price / earnings per share

Sales per share =

Sales / Shares

Price-sales ratio =

price per Share / Sales per share

Did cash go up or down =

Decrease in inventory is a source of cash
Decrease in accounts payable is a use of cash
Increase in notes payable is a source of cash
Increase in accounts receivable is a use of cash
Change in cash = Sources ? Uses =

Average suppliers pay off =

365 / (cost of goods sold / Accounts payable)

Enterprise value-EBITDA multiple =

enterprise value / EBITDA

enterprise value =

Market capitalization + Debt ? Cash

EBITDA =

EBIT + Depreciation & Amortization

equity multiplier EM =

1 + D/E (debt equity)

ROE =

(ROA)(EM)

Net income =
ROE = NI / TE
so =

NI = ROE(TE)

Cash ratio =

Cash / Current liabilities

NWC ratio to total assets =
before that NWC = CA - CL

NWC / Total assets

Debt-equity ratio =

Total debt / Total equity

Equity multiplier =

1 + D/E (Debt-equity ratio)
or total assets / total equity

Total debt ratio =

(Total assets - Total equity) / Total assets

Long-term debt ratio =

Long-term debt / (Long-term debt + Total equity)

PM =
profit margin

NI / Sales

interval measure =

current assets / average daily operating cost

NWC turnover =

sales / NWC

fixed assets turnover =

sales / net fixed assets

total assets turnover =

sales / total assets

times interest earned ratio =

EBIT / interest

cash coverage ratio =

EBIT + depreciation / interest

ROA =

net income / total assets

price-earning ratio =

price per share / earning per share

PEG ratio =

price-earnings ratio / earnings growth rate %

market-to-book-ratio =

market value per share / book value per share

Tobin's Q ratio =

market value of assets / replacement cost of assets

enterprise value-EBITDA ratio =

enterprise value / EBITDA