ScienceEconomicschapter 3 example #31054
Please enter something

chapter 3 example #31054

Yoel Rodriguez avatar Yoel Rodriguez
18 December 2023
4.5 (88 reviews)
49 test answers

Unlock all answers in this set

Unlock answers (45)
question
ratio analysis
answer
allows for a better comparison over time
question
common size balance sheets
answer
all accounts = percent of total assets (%TA)
question
common size income statements
answer
all line items= percent of sales or revenue ($SLS)
question
common size financial statements present all balance sheet account values as a percentage of?
answer
total assets
question
common size percentage
answer
net income/ sales
question
stock price is influenced by:
answer
management efficiency and macroeconomic factors.
question
return on equity (ROE)
answer
NI/ total equity
question
a different approach to ROE analysis: 3 factors that determine performance.
answer
look at profitability, asset turnover (efficiency), leverage (debt usage)
question
ROE=
answer
(NI/total assets) x (total assets/total equity)
question
Return on assets x equity multiplier=
answer
ROE x EM
question
Du pont can identify what
answer
degree of financial leverage operating efficiency utilization rate of a firms assets and a rate of return on a firms assets.
question
liquidity ratios
answer
current ratio, quick ratio, cash ratio
question
how do we evaluate liquidity ratios?
answer
trends, peer number
question
total debt ratio
answer
(total assets- equity) / total assets
question
debt to equity
answer
(total debt/ total equity)
question
equity multiplier=
answer
total assets/ total equity= 1 + D/E
question
what do financial leverage ratios measure?
answer
debt
question
times interest earned
answer
EBIT/ interest
question
cash coverage
answer
(EBIT+ depreciation)/ interest
question
inventory ratio
answer
COGS/ Inventory
question
days in inventory
answer
365/ inventory turnover
question
receivables turnover=
answer
sales/AR
question
days in receivables (average collection period)=
answer
365/ receivables turnover
question
Inventory turnover
answer
Cogs or net sales/ Avg. inventory
question
earnings per share
answer
net income/ outstanding shares
question
fixed asset turnover
answer
sales/ net fixed assets
question
total asset turnover
answer
sales/total assets
question
capital intensity ratio
answer
1/total asset turnover
question
profit margin
answer
NI/ sales
question
return on assets (ROA)
answer
NI/ TA
question
Return on equity (ROE)
answer
NI/TE
question
PE ratio
answer
price/ EPS
question
Price/ sales ratio
answer
price/ sales per share
question
book value per share
answer
total equity/ shares outstanding
question
market to book ratio
answer
price/ book value per share
question
levered firm
answer
firm with debt
question
2 variable ROE
answer
ROA x EM
question
3 variable ROE
answer
PM x TAT x EM
question
quick ratio
answer
(CA-inventory)/ CL
question
cash ratio
answer
cash/ CL
question
div payout ratio "(1-b)'
answer
DPS/EPS =cash div/Net income
question
retention ratio "(b)'
answer
(NI - DIV)/ NI = additional to retained earnings/ net income or (1-Div rat)
question
internal growth rate
answer
ROA x b/ 1-(ROA x b)
question
sustainable growth rate
answer
ROE x b/ 1- (ROE x b)
question
if a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is...?
answer
zero percent
question
determinants of growth
answer
profit margin- operating efficiency total asset turnover-asset use efficiency financial leverage- choice of optimal debt ratio dividend policy- choice of how much to pay shareholders versus reinvesting in the firm
question
a firm has a return on equity of 16%, a return on assets of 11%. a 40% dividend payout ratio. what is the sustainable growth rate?
answer
ROE x b/ 1- roe x b= 10.62 % to get b you do (1- .4)
question
what does sustainable growth rate measure?
answer
How much the firm can grow by using internally generated funds and issuing debt to maintain a constant debt ratio
question
total equity
answer
TA/ (d/e +1)