| Formula: Current ratio | Current assets / current liabilities |
| What are the five components in the DuPont analysis of ROE (in order) and how are these calculated? | Tax burden (NI / EBT) * Interest burden (EBT / EBIE) * profit margin (EBIE / Sales)* Asset turnover (Sales / assets) * Financial leverage (assets / shareholders equity) |
| Formula: Quick ratio | (Cash + Short-term marketable instruments + Receivables) / Current liabilities |
| Formula: Cash ratio | (Cash + Short-term marketable instruments) / Current liabilities |
| Formula: Defensive interval ratio | (Cash + Short-term marketable investments + Receivables) / Daily cash expenditures |
| Formula: Cash conversion cycle. Also explain what is means! | DOH + DSO - Number of days payable.
Explanation: Shows the amount of time it takes from when a company invests in working capital until it collects cash from customers. |
| Formula: Days of inventory on hand (DOH) | Number of days in period / Inventory turnover |
| Formula: Liquid Assets (LA) | Cash and cash equivalents |
| What kind of liability is interest bearing debt (D)? | A financial liability |
| What kind of liability is non-interest bearing debt (NIBL)? | An operating liability |
| What is liabilities made up of (L)? | Financial liabilities and operating liabilities (D+NIBL) |
| How is Net Debt (ND) calculated? | Financial liabilitys - Liquid assets (D-LA) |
| What is Capital Employed (CE) made up of and calculated? | Total assets - non-interest bearing liabilities or financial liabilities + equity (A-NIBL) or (D+E) |
| What is Invested Capital (IC) made up of and calculated? | Equity + Net debt (E+ND)or;Fixed Assets + Working Capital (FA+WC) or;Capital Employed - Liquid Assets (CE-LA) or;Total assets - Liquid assets - Non-interest bearing liabilities (A-LA-NIBL) |
| Formula: ROCE | EBIE / CE |
| Formula: ROIC | EBIT / IC |
| Formula: COL, COD and COND | COL = IE / L
COD = IE / D
COND = (IE - II (interest income)) / ND |
| Formula: ROE using ROA (DuPont)? | ROE = ROA + (ROA-COL) * (L/E) |
| Formula: ROE using ROCE (DuPont)? | ROE = ROCE + (ROCE-COD) * (D/E) |
| Formula: ROE using ROIC (DuPont)? | ROE = ROIC + (ROIC-COND) * (ND/E) |
| Formula: Growth in equity | E(t) / E(t-1) = ROE* - DIV/E + New Issue/E |
| What is the three ways to grow equity assuming high ROE*? | 1. A low dividend payout ratio
2. Directly through high ROE*
3. High share price --> New share issue possible |
| How is the DuPont relationship correlated to the leverage relationship and later change in equity (operations linked to financials)? | By looking at sales and assets we can through the DuPont relationship derive the ROA, ROCE or ROIC (profit margin * asset turnover). This derivation can then be used ro calculate ROE* through the leverage relationship [(ROA + (ROA-COL) *(L/E)] * (1-t). ROE* can then be used to calculate the change in equity where ROE* - DIV/E + NI/E = Et/Et-1 (see picture) |
| Formula: ROCE using weighted average? | ROCE = ROE * (E/CE) + COD * (D/CE) |
| Formula: Inventory turnover | COGS / Average inventory |
| Formula: Days of inventory on hand (DOH) | 365 / Inventory turnover |
| Formula: Receivables turnover | Sales / Average account receivables |
| Formula: Days of sales outstanding (DSO) | 365 / Receivables turnover |
| Formula: Payables turnover | Purchases* / Average account payables
* Purchases = COGS +- Change in inventory |
| Formula: Number of days payable | 365 / Payables turnover |
| Formula: Working capital turnover | Sales / Average working capital |
| Formula: Fixed asset turnover | Sales / Average fixed assets |
| Formula: Capital turnover | Sales / Average capital employed |
| Formula: Cash-to-Sales ratio | (Cash + Marketable securities) / Sales |
| Formula: Cash-to-Sales ratio (including unutilized credit facilities) | (Cash + marketable securities + unutilized credit facilities) / Sales |
| Formula: Cash flow from operations ratio | Cash flow from operations / Current liabilities |
| Formula: Defensive interval | 365 * ((Cash + Marketable securities + receivables) / Projected Expenditures*)
* Calculated as: COGS, SG&A, other operating rev. & exp - D&A |
| Formula: Cash conversion cycle | DOH + DOS - Number of days payable |
| Formula: Machinery & Equipment (Average Economic life, years) | Acquisition value M&E / Depreciation M&E |
| Formula: Machinery & Equipment (Average age, years) | (Accumulated depreciation M&E / Acquisition Value M&E) * Economic Life years |
| Formula: Debt-to-equity ratio | Total debt / total equity |
| Formula: Debt-to-capital ratio | Total debt / Capital employed (debt + equity) |
| Formula: Solvency (equity ratio) | Total equity / Total assets |
| Formula: Interest coverage ratio (times interest earned) | EBIE / Interest expense |
| Formula: EBITDA coverage ratio | EBITDA / Interest expense |
| Formula: Capex ratio | Cash flow from operations / net investment in tangible and intangible FA |
| Formula: Capex-to-sales ratio | Net investment in tangible and intangible FA / Sales |
| Formula: Capex-to-depreciation ratio | Net investment in tangible and intangible FA / D&A |
| Formula: CFO-to-debt ratio | CFO / Total debt |
| Formula: Debt-to-EBITDA ratio | Total debt / EBITDA |
| Formula: Gross profit margin | Gross profit / Sales |
| Formula: Sales & Admin percentage | Sales & Admin expenses / Sales |
| Formula: EBITDA margin | EBITDA / Sales |
| Formula: Operating profit margin (EBIT margin) | EBIT / Sales |
| Formula: Profit margin | EBIE / Sales |
| Formula: Pre-tax margin | EBT / Sales |
| Formula: Net profit margin | Net income / Sales |
| Formula: Return on assets (ROA) | EBIE / Average total assets |
| Formula: Return on capital employed (ROCE) | EBIE / Average capital employed |
| Formula: Return on equity (ROE) | Net income / Average equity |
| Formula: Employee contribution | (Sales - personnel expenses) / Average number of employees |
| Formula: ROE (pretax) | EBT / Average equity |
| ROE - DuPont formula with three components | (Net Income / Sales) * (Sales / Assets) * (Assets / Equity)
Net profit margin * Asset turnover * Financial leverage |
| Formula: DDM without growth | (E0 * ROE * p.r.) / Re |
| Formula: DDM with growth | (E0 * ROE * p.r.) / (Re - g) |
| How is g calculated? | g = ROE * (1 - p.r.) |
| What should ROE and Re be in steady state? | ROE should be equal to Re since abnormal returns doesn't hold in the long run |
| What happens to Vo if ROE = Re? | The V0 will be the same regardless of p.r. |
| What happens to V0 if ROE is not the same as Re? | Then V0 will be higher the lower p.r. is and vice versa |
| How is the Permanent Measurement Bias (PMB) measured? | PMB = (V0 / E0) - 1 |
| How is ROE adjusted for accounting conservatism? | Re + PMB*(Re - gss) |
