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S Totalshare Dividends PFD Netincome: Debt (Solvency) Ratios

This document outlines various financial metrics used to evaluate the performance and health of a business. It defines key accounting concepts like assets, liabilities, equity, earnings, and provides formulas to calculate financial ratios in several categories - liquidity, solvency, activity, profitability, and DuPont analysis. These ratios are used to analyze a company's operational efficiency, debt management, earnings quality, and profit generation using metrics like return on assets, return on equity, profit margins, inventory turnover, and cash conversion cycle.

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Farin Kazi
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42 views3 pages

S Totalshare Dividends PFD Netincome: Debt (Solvency) Ratios

This document outlines various financial metrics used to evaluate the performance and health of a business. It defines key accounting concepts like assets, liabilities, equity, earnings, and provides formulas to calculate financial ratios in several categories - liquidity, solvency, activity, profitability, and DuPont analysis. These ratios are used to analyze a company's operational efficiency, debt management, earnings quality, and profit generation using metrics like return on assets, return on equity, profit margins, inventory turnover, and cash conversion cycle.

Uploaded by

Farin Kazi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Assets Liabilities = Equity

Assets = (Contributed Capital + Beginning Earnings + Revenue) + Liabilities Expenses


Dividends

Sales
COGS
Gross Margin
Operating expense
Operating Profit
Interest Expense
Income before Taxes
Provision for Taxes
Income from Continuing Operations
Provision for Taxes
Income from Discontinued Operations (Net of Taxes)
Net Income

NetIncome Pfd .Dividends


TotalShares

Basic EPS =

Diluted EPS =

( NetIncome Pfd .Dividends) + (Conv.PfdDividend ) + Conv.DebtInterest )(1 t )


TotalShares + Conv. prf .Shares + Conv.DebtShares + SharesfromOptions

Profit Margin = Net Income / Sales

Current ratio = Current Assets / Current liablities

Quick ration = (Current assets Inventory) / Current Liabilities

Cash ratio = (Cash + Cash Equivalents) / Current liabilities

Debt (Solvency) Ratios:

Long Term debt to Equity = Long Term Debt / Total Equity

Debt Ratio to Equity = Total Debt / Total Equity

Total Debt Ratio = Total Debt / Total Assets

Financial Leverage = Assets / Equity

Not responsible for material errors


http://www.sreenimeka.com

Inventory:

Begin Inventory + Purchases COGS = End Inventory.

FIFO Inventory LIFO Inventory = LIFO reserve

COGS FIFO = COGS LIFO - Change in LIFO Reserve

COGS FIFO = COGS LIFO - (LIFO Res End - LIFO Res Beg )

COGS LIFO = COGS FIFO + (BEG INV FIFO * Inflation)

Depreciation:

Straight line depreciation = (Actual Cost Salvage) / Depreciable Life

Sum of the year Depreciation: Add all years (for Four years 1+2+3+4= 10), then the first year
depreciation is 4/10, followed by 3/10, 2/10, 1/10.

Double-Declining Depreciation = (2/Depreciable life) * Value at Begin of the Year

Activity Ratios:

Receivable Turnover = (Annual Sales / Average Receivables)

Days of sales Outstanding (Avg. Collection Period) = 365 / Receivable turnover

Inventory Turnover = (Cost of Goods Sold / Avg. Inventory)

Days of On hand Inventory = 365 / Inventory Turnover

Payable Turnover = Purchases / Avg. Payables

Days of Payable = 365 / Payable turnover

Asset Turnover = Sales / Average Assets

Fixed Asset Turnover = Sales / Average Fixed Assets

Cash Conversion Cycle = Days of sales Outstanding + Days of Inventory - Days of Payable

Profitability Ratios:

Profit Margin = Net Income / Sales

Gross margin = Gross Profit / Sales

Operating Margin = Operating Profit / Sales (EBIT / Sales)

Pretax Margin = (EBT / Sales)

Return on Assets ROA = Net Income / Total Assets

Not responsible for material errors


http://www.sreenimeka.com

Return on Capital (ROTC) = Net Income / Total Capital

Total capital = add short term debt, Long term debt, Preferred Equity and Common Equity

Return on Equity (ROE) = Net Income / Total Equity

Return on Common Equity = ( Net Income Preferred Dividend) / Common Equity

DuPont Equation for ROE

ROE = (Net Income/Sales) * (Sales/ Equity)


= Profit Margin * Equity Turn Over

ROE = (Net Income/Sales) * (Sales/ Assets) * (Assets/Equity)


= Profit Margin * Asset Turn Over * Leverage
= Return on Assets * Leverage
(ROA = NI/Assets or Profit Margin* Asset Turnover)

DuPont Equation - 5 Part Equation:


ROE = (NI/EBT) *(EBT/EBIT) * (EBIT/Sales) * (Sales/Assets) * (Assets/Equity)
Tax Burden Equals to (1-T) *
Interest Burden *
Operating Margin *
Asset Turn Over *
Leverage
Growth Rate (g) = ROE * Plough back ratio (or Retention Ratio)
Retention ratio = 1-dividend ratio

Not responsible for material errors


http://www.sreenimeka.com

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