A-28 Appendix C Selected Equations and Tables
Chapter 4
Current ratio! _______________CurrCurrent liabilitiesent assetsQuick, or acid test, ratio! Curr__ent assets Curr (^) ent liabilities# Inventories
Inventory turnover ratio! __InventoriesSales
Days sales outstanding (DSO)! (^) Average sales per daRec eiv ables (^) y! ____Annual sales/365Receiv ables
Fixed assets turnover ratio! (^) Net __! xed Sales (^) assets
Total assets turnover ratio! (^) Total assets__Sales
Debt ratio! __Total assetsTotal debt
Times-interest-earned (TIE) ratio! __Interest charEBIT (^) ges
D/E! 1 #D/A D/A and D/A! 1 "D/E D/E
EBITDA coverage!
EBITDA " Lease payments
Inter____est " Principal pa^ yments^ " Lease pa^ yments^
Operating margin!
Operating income (EBIT)
__Sales
Pro! t margin! Net inc__Salesome
Return on total assets (ROA)! Net incTotal assets__ome
Basic earning power (BEP)! __Total assetsEBIT
Return on investors’ capital (ROIC)! ____Net incDebt ome " (^) Equity" Inter est
Return on common equity (ROE)! __Common equitNet inc ome (^) y
Price/Earnings (P/E) ratio!
Price per share
____Earnings per shar (^) e
Book value per share!
Common equity
_Shares outstanding
Market/book ratio (M/B)!
Market price per share
____Book value per shar (^) e
ROE! Pro! t margin $ Total assets turnover $ Equity multiplier
! Net inc__Salesome $ (^) Total assets__Sales $ (^) Total c___Total assetsommon equit (^) y
EVA! EBIT(1 # Corporate tax rate) # (Total investors’ capital) $ (After-tax cost of capital)
EVA! Net income # (Equity capital) $ (Cost of equity capital)
! (Equity capital)[Net income/Equity capital # Cost of equity capital]
! (Equity capital)(ROE # Cost of equity capital)
Chapter 5
Future value! FVN! PV(1 " I)N
Present value! PV!
FVN
(1 " I)N
FVAN! PMT(1 " I)N-1 " PMT(1 " I)N-2 " PMT(1 " I)N-3 "... " PMT(1 " I)^0
! PMT [ (1 " I)
N # 1
__I (^) ]