LIQUIDITY RATIO

!"##$%& !""#$"
Current Ratio = !"##$%& !"#$"%"&"'(

!"##$%&' !""#$"!!"#$"%&'($)
Quick (or) Acid Test Ratio = !"##$%& !"#$"%"&"'(

ASSET MANAGEMENT RATIO

!"#$%
Inventory Turnover Ratio = !"#$"%&'($)

!"#"$%&'(")
Day Sales Outstanding (DSO) = !"#$%&# !"#$% !"# !"#

!""#$% !"#$%
Average Sales per Day* = !"#

!"#$%
Fixed Assets Turnover Ratio = !𝑒! !"#$% !""#$"

!"#$%
Total Assets Turnover Ratio = !"#$% !""#$"

DEBT MANAGEMENT RATIO

!"#$% !"#$"%"&"'(
Debt Ratio = !"#$% !""#$"

!"#$
Times-Interest-Earned (TIE) Ratio = !"#$%$&# !!!"#$%
(Earning Before Interests and Taxes)

!"#$%&!!"#$" !"#$%&'(
EBITDA coverage Ratio = !"#$%$&#!!"#$%&'() !"#$%&'(!!"#$" !"#$%&'(

PROFITABILITY RATIO
!"# !"#$%& !"!#$!%$& !" !"##"$ !"#$%!!"#$%
Profit Margin on Sales = !"#$%

!"#$
Basic Earning Power (BEP) = !"#$% !""#$"

!"# !"#$%& !"!#$!%$& !" !"##"$ !"#$%!!!"#$

Return on Total Assets (ROA) = !"#$%&''(#'

!"# !"#$%& !"!#$!%$& !" !"##"$ !"#$%!!"#$%

Return on Common Equity (ROE) = !"##"$ !"#$%&

MARKET VALUE

!"#$% !"# !!!"#

Price / Earning (P/E) = !"#$%$! !"# !!!"#
!"#$% !"# !!!"#
Price / Cash flow Ratio = !"#! !"#$ !"# !!!"#

!"#$%& !"#$% !"# !!!"#

Market / Book Ratio = !""# !"#$% !"# !!!"#

!"##"$ !"#$%!
Book Value per Share* = !!!"# !"#$#%&'(&)
THE DU PONT EQUATION

ROA = Profit Margin x Total Assets Turnover = ROE

!"# !"#$%& !"#$% !"# !"#$%&
= !"#$%
x !"#$% !""#$"
= !"##"$ !"#$%&

!"#$% !""#$"
Equity multiplier = !"##"$ !"#$%&

ROE = ROA x Equity Multiplier

!"# !"#$%& !"#$% !""#$"
= !"#$% !""#$"
x !"##"$ !"#$%&

= Profit Margin x Total Assets Turnover x Equity Multiplier

!"# !"#$%& !"#$% !"#$% !""#$"
= !"#$%
x !"#$% !""#$"
x !"##"$ !"#$%&

BALANCE SHEET (Statement of Financial Position)

Assets 20XX Liabilities and Equity 20XX

Cash and equivalent xxx Account payable xxx

Short-term investment xxx Notes payable xxx
Accounts receivable xxx Accruals xxx
Inventories xxx Total current Liabilities xxx
Total current Assets xxx Long-term bonds xxx
Net Plants & Equipment xxx Total Liabilities xxx
Preferred Stock xxx
Common Stock xxx
Retained earnings xxx
____ Total Common Equity xxx
Total Assets xxx Total Liabilities & Equity xxx

INCOME STATEMENT

20XX
Net sales xxxx
Operating costs excluding depreciation and amortization (xxxx)
Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) xxxx
Depreciation xxxx
Amortization xxxx
Depreciation and Amortization (xxxx)
Earnings before Interests and Taxes (EBIT) xxxx
Less Interests (xxxx)
Earnings before Taxes (EBT) xxxx
Taxes (xxxx)
Net Income before Preferred dividends xxxx
Preferred dividends (xxxx)
Net Income xxxx
Common dividends (xxx)
Addition to Retained Earnings xxxx
 !"# !"#$%&
Earning Par Share (EPS) = !"##"$ !!!"# !"#$#%&'(&)

!"#"$%&$' !"#$ !" !"##"$ !"#$%!!"#$%&

Dividends Per Share (DPS) = !"##"$ !!!"# !"#$#%&'(&)

!"#$% !"##"$ !"#$%&

Book Value Per Share (BVPS) = !"##"$ !!!"# !"#$#%&'(&)

STATEMENT OF CASH FLOWS

1. Net income before preferred dividends. Other things held constant, a positive net income will
lead to more cash in the bank. However, as we shall discuss, other things generally are not held
constant.
2. Noncash adjustments to net income. To calculate cash flow, it is necessary to adjust net income
to reflect noncash revenues and expenses, such as depreciation and deferred taxes, as shown
previously in the calculation of net cash flow.
3. Changes in working capital. Increases in current assets other than cash (such as inventories and
accounts receivable) decrease cash, whereas decreases in these accounts increase cash. For
example, if inventories are to increase, then the firm must use some of its cash to acquire the
additional inventory. Conversely, if inventories decrease, this generally means the firm is selling
inventories and not replacing all of them, hence generating cash. On the other hand, if payables
increase then the firm has received additional credit from its suppliers, which saves cash, but if
payables decrease, this means it has used cash to pay off its suppliers. Therefore, increases in
current liabilities such as accounts payable increase cash, whereas decreases in current liabilities
decrease cash.
4. Investments. If a company invests in fixed assets or short-term financial investments, this will
reduce its cash position. On the other hand, if it sells some fixed assets or short-term investments,
this will increase cash.

5. Security transactions and dividend payments. If a company issues stock or bonds during the
year, the funds raised will increase its cash position. On the other hand, if the company uses cash
to buy back outstanding stock or to pay off debt, or if it pays dividends to its shareholders, this
will reduce cash.

Each of these five factors is reflected in the statement of cash flows, which summarizes the changes
in a company’s cash position. The statement separates activities into three categories, plus a summary
section, as follows.

1.Operating activities, which includes net income, depreciation, changes in current assets and
liabilities other than cash, short-term investments, and short-term debt.

2.Investing activities, which includes investments in or sales of fixed assets and short-term financial
investments.

3.Financing activities, which includes raising cash by issuing short-term debt, long-term debt, or
stock. Also, because dividend payments, stock repurchases, and principal payments on debt reduce a
company’s cash, such transactions are included here.
STATEMENT OR CASHFLOW FOR 20XX
$
1. Operating Activities
Net Income before preferred dividends xxxx
Adjustment;
Noncash adjustment
Depreciationa xxxx
Amortization xxxx
Due to changes in Working Capitalb
(Increase) / Decrease in Account Receivable (xxxx)
(Increase) / Decrease in Inventories (xxxx)
Increase / (Decrease) in Account Payable xxxx
Increase / (Decrease) in Accrual xxxx
______
Net Cash Provided / (Used) by Operating Activities xxxx
2. Investing Activities
Long-term Investing Investment
(Cash used to acquire Fixed Assets) / Sales of Fixed Assets xxxx
3. Financing Activities
Sales / (Purchases) of Short-term Investment xxxx
Increase / (Decrease) in Note Payable xxxx
Increase / (Decrease) in Bonds Outstanding xxxx
Payment of Preferred and Common Dividends (xxxx)
______
Net Cash Provided / (Used) by Financing Activities xxxx
Summary
Net Change in Cash (Used) / provided xxxx
Cash at Beginning of year xxxx
_____
Cash at End of year xxxx
=====

a
Depreciation is a noncash expense that was deducted when calculating net income. It must be added back to show the correct
cash flow from operations.

b
An increase in a current asset decreases cash. An increase in a current liability increases cash. For example, inventories increased
by some amount and therefore reduced cash by a like amount.

c
The net increase in fixed assets; however, this net amount is after a deduction for the year’s depreciation expense. Depreciation
expense would have to be added back to find the increase in gross fixed assets. From the company’s income statement, we see that
the current year depreciation expense; thus, expenditures on fixed assets were actually added the founded depreciation expenses.
Calculating Free Cash Flow