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    Mohamad Ibrahim

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    Mohamad Ibrahim
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    © All Rights Reserved
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    4 views3 pages

    Exam

    Uploaded by

    Mohamad Ibrahim

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    • Current Ratio = CA / CL

    ▪ 2,168 / 1,995 = 1.09 times


    ▪ Quick Ratio = (CA - Inventory) / CL
    ▪ (2,168 - 501) / 1,995 = .84 times
    ▪ Cash Ratio = Cash / CL
    ▪ 108 / 1,995 = .05 times
    ▪ NWC to Total Assets = NWC / TA
    ▪ (2,168 - 1,995) / 5,606 = .03
    ▪ Interval Measure = CA / average daily operating
    costs
    ▪ 2,168 / ((2,006 + 1,740)/365) = 211.2 days
    • Total Debt Ratio = (TA - TE) / TA
    ▪ (5,606 - 2,768) / 5,606 = 50.62%
    ▪ Debt/Equity = TD / TE
    ▪ (5,606 - 2,768) / 2,768 = 1.03 times
    ▪ Equity Multiplier = TA / TE = 1 + D/E
    ▪ 1 + 1.03 = 2.03
    ▪ Long-term debt ratio = LTD / (LTD + TE)
    ▪ 843 / (843 + 2,768) = 23.35%
    • Times Interest Earned = EBIT / Interest
    ▪ 1,138 / 7 = 162.57 times
    ▪ Cash Coverage = (EBIT + Depreciation) / Interest
    ▪ (1,138 + 116) / 7 = 179.14 times
    • Inventory Turnover = Cost of Goods Sold / Inventory
    ▪ 2,006 / 501 = 4.00 times
    ▪ Days’ Sales in Inventory = 365 / Inventory Turnover
    ▪ 365 / 4.00 = 91 days
    • Receivables Turnover =
    Sales / Accounts Receivable
    ▪ 5,000 / 1,156 = 4.33 times
    ▪ Days’ Sales in Receivables =
    365 / Receivables Turnover
    ▪ 365 / 4.33 = 84 days
    • Total Asset Turnover =
    Sales / Total Assets
    ▪ 5,000 / 5,606 = .89
    ▪ It is not unusual for TAT < 1, especially if a firm has a large amount of fixed assets
    ▪ NWC Turnover = Sales / NWC
    ▪ 5,000 / (2,168 - 1,995) = 28.90 times
    ▪ Fixed Asset Turnover = Sales / NFA
    ▪ 5,000 / 3,438 = 1.45 times
    ▪ Profit Margin = Net Income / Sales
    ▪ 893 / 5,000 = 17.86%
    ▪ Return on Assets (ROA) = Net Income / Total Assets
    ▪ 893 / 5,606 = 15.93%
    ▪ Return on Equity (ROE) = Net Income / Total Equity
    ▪ 893 / 2,768 = 32.26%
    ▪ Market Price = $87.65 per share
    ▪ Shares outstanding = 190.9 million
    ▪ PE Ratio = Price per share / Earnings per
    share
    ▪ 87.65 / 4.68 = 18.73 times
    ▪ Market-to-book ratio = Market value per share /
    Book value per share
    ▪ 87.65 / (2,768 / 190.9) = 6.04 times
    Deriving the DuPont Identity
    ▪ ROE = NI / TE
    ▪ Multiply by 1 (TA/TA) and then rearrange
    ▪ ROE = (NI / TE) (TA / TA)
    ▪ ROE = (NI / TA) (TA / TE) = ROA × EM
    ▪ Multiply by 1 (Sales/Sales) again and then rearrange
    ▪ ROE = (NI / TA) (TA / TE) (Sales / Sales)
    ▪ ROE = (NI / Sales) (Sales / TA) (TA / TE)
    ▪ ROE = PM × TAT × EM
    ▪ ROE = PM × TAT × EM
    ▪ Profit margin is a measure of the firm’s operating efficiency – how well it controls costs.
    ▪ Total asset turnover is a measure of the firm’s asset use efficiency – how well does it
    manage its assets.
    ▪ Equity multiplier is a measure of the firm’s financial leverage.

    • Cash Flow From Assets (CFFA) =


    Cash Flow to Creditors
    + Cash Flow to Stockholders
    • Cash Flow From Assets = Operating Cash Flow - Net Capital
    Spending - Changes in NWC
    • OCF (I/S) = EBIT + depreciation -
    taxes = $628
    • NCS (B/S and I/S) = ending net fixed assets - beginning net fixed assets + depreciation = $130
    • Changes in NWC (B/S) = ending
    NWC - beginning NWC = $391
    • CFFA = 628 - 130 - 391 = $107
    • CF to Creditors (B/S and I/S) = interest paid - net new borrowing = $24
    • CF to Stockholders (B/S and I/S) = dividends paid - net new equity raised = $83
    • CFFA = 24 + 83 = $107
    • Current Accounts
    • 2018: CA = 3,625; CL = 1,787
    • 2017: CA = 3,596; CL = 2,140
    • Fixed Assets and Depreciation
    • 2018: NFA = 2,194; 2014: NFA = 2,261
    • Depreciation Expense = 500
    • Long-term Debt and Equity
    • 2018: LTD = 538; Common stock & APIC = 462
    • 2017: LTD = 581; Common stock & APIC = 372
    • Income Statement
    • EBIT = 1,014; Taxes = 193
    • Interest Expense = 93; Dividends = 460
    • OCF = 1,014 + 500 - 193 = 1,321
    • NCS = 2,194 - 2,261 + 500 = 433
    • Changes in NWC = (3,625 - 1,787) - (3,596 - 2,140) = 382
    • CFFA = 1,321 - 433 - 382 = 506
    • CF to Creditors = 93 - (538 - 581) = 136
    • CF to Stockholders = 460 - (462 - 372) = 370
    • CFFA = 136 + 370 = 506
    • The CF identity holds.

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