MGT 497 Financial, Trends, Ratios Prof. Rick Hayes, Ph.D., CPA
Game Weighting Factors <ul><li>Return on Assets (ROA)  </li></ul><ul><li>Return on Equity (ROE) </li></ul><ul><li>Market S...
Return on Assets (ROA) This ratio measures how well assets have been employed. Return on Total Assets Average  Net Income ...
Return on Equity This ratio measures the ability of management to generate net income from the resources the owners provid...
Market Share, Stock Price, Unit Production Cost  Stock Price = Average Year end stock Price Years 3 thru 6 Unit Production...
Ratios <ul><li>Liquidity:  Current Ratio </li></ul><ul><li>Quick Ratio </li></ul><ul><li>Leverage:  Debt to Equity  </li><...
Liquidity Ratios = Current ratio Current assets Current liabilities Measures a company’s ability to satisfy its short-term...
Leverage Ratios = Debt to equity ratio Total liabilities Shareholders’ equity Indicates the extent of reliance on creditor...
Profit Margin on Sales This ratio indicates the portion of each dollar of revenue that is available to cover expenses. Pro...
Return on Total Assets This ratio measures how well assets have been employed. Return on Total Assets Net Income  Average ...
Profit Ratios Net income Total assets = Return on assets Net Profit Invested Capital = Return on Invested Capital
Return on Equity This ratio measures the ability of management to generate net income from the resources the owners provid...
Receivables Turnover Ratio Whenever a ratio divides an income statement balance by a balance sheet balance, the average fo...
Days Sales Outstanding or Average Collection Period This ratio is an approximation of the number of days the average accou...
Inventory Turnover Ratio This ratio measures the number of times merchandise inventory is sold and replaced during the yea...
Average Days in Inventory This ratio indicates the number of days it normally takes to sell inventory. 365   Inventory Tur...
Basic Earnings Per Share <ul><ul><li>Net income (after tax) – Preferred dividends * </li></ul></ul><ul><ul><li>Weighted av...
Shareholder Return Ratios Market price per share Earnings per share = Price-Earnings Ratio Dividend per share Market price...
Upcoming SlideShare
Loading in …5
×

MGT497FinancialTrendsRatios.ppt

1,105 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,105
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
42
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • 55 55
  • 56 56
  • 56 56
  • 35 Illustration 7.3
  • 54 54
  • 55 55
  • 56 56
  • 48 48
  • 50 50
  • 50 50
  • 50 50
  • MGT497FinancialTrendsRatios.ppt

    1. 1. MGT 497 Financial, Trends, Ratios Prof. Rick Hayes, Ph.D., CPA
    2. 2. Game Weighting Factors <ul><li>Return on Assets (ROA) </li></ul><ul><li>Return on Equity (ROE) </li></ul><ul><li>Market Share (MS) </li></ul><ul><li>Stock Price (SP) </li></ul><ul><li>Unit Production Costs (UPC) </li></ul><ul><li>Total Net Income (TNI) </li></ul>
    3. 3. Return on Assets (ROA) This ratio measures how well assets have been employed. Return on Total Assets Average Net Income Yr 3 thru 6 Average Year End Assets Yrs 3 thru 6 =
    4. 4. Return on Equity This ratio measures the ability of management to generate net income from the resources the owners provide. Return on Equity Average Net Income Yrs 3 thru 6 Average Shareholders’ Equity Yrs 3 thru 6 =
    5. 5. Market Share, Stock Price, Unit Production Cost Stock Price = Average Year end stock Price Years 3 thru 6 Unit Production Cost (UPC) = Average Unit Production Cost Years 3 thru 6 Total Net Income (TNI) = Sum of Net Income for Years 3 thru 6 Market Share Total Company Dollar Sales Yrs 3 t 6 Total Industry Dollar Sales Yrs 3 thru 6 =
    6. 6. Ratios <ul><li>Liquidity: Current Ratio </li></ul><ul><li>Quick Ratio </li></ul><ul><li>Leverage: Debt to Equity </li></ul><ul><li>Times Interest Earned (Times Covered) </li></ul><ul><li>Debt to Assets </li></ul><ul><li>Profitability: Net/Gross profit margins </li></ul><ul><li>Return on Invested Capital (ROIC) </li></ul><ul><li>Return on Total Assets (ROA) </li></ul><ul><li>Return on Shareholder’s Equity (ROE) </li></ul><ul><li>Activity: Days Sales Outstanding (DSO) </li></ul><ul><li>Inventory Turnover </li></ul><ul><li>Shareholder : Total Shareholder Returns </li></ul><ul><li>Returns Price Earnings Ratio (P/E) </li></ul><ul><li>Dividend Yield </li></ul>
    7. 7. Liquidity Ratios = Current ratio Current assets Current liabilities Measures a company’s ability to satisfy its short-term liabilities = Acid-test ratio Quick assets Current liabilities Provides a more stringent indication of a company’s ability to pay its current liabilities
    8. 8. Leverage Ratios = Debt to equity ratio Total liabilities Shareholders’ equity Indicates the extent of reliance on creditors, rather than owners, in providing resources = Times interest earned ratio Net income + Interest expense + Taxes Interest expense Indicates the margin of safety provided to creditors
    9. 9. Profit Margin on Sales This ratio indicates the portion of each dollar of revenue that is available to cover expenses. Profit Ratios Profit Margin on Sales Net Income Net Sales =
    10. 10. Return on Total Assets This ratio measures how well assets have been employed. Return on Total Assets Net Income Average Total Assets =
    11. 11. Profit Ratios Net income Total assets = Return on assets Net Profit Invested Capital = Return on Invested Capital
    12. 12. Return on Equity This ratio measures the ability of management to generate net income from the resources the owners provide. Return on Equity Net Income Average Shareholders’ Equity =
    13. 13. Receivables Turnover Ratio Whenever a ratio divides an income statement balance by a balance sheet balance, the average for the year is used in the denominator. This ratio measures how many times a company converts its receivables into cash each year. Net Sales Average Accounts Receivable Receivables Turnover Ratio =
    14. 14. Days Sales Outstanding or Average Collection Period This ratio is an approximation of the number of days the average accounts receivable balance is outstanding. 365 Receivables Turnover Ratio Average Collection Period =
    15. 15. Inventory Turnover Ratio This ratio measures the number of times merchandise inventory is sold and replaced during the year. Cost of Goods Sold Average Inventory Inventory Turnover Ratio =
    16. 16. Average Days in Inventory This ratio indicates the number of days it normally takes to sell inventory. 365 Inventory Turnover Ratio Average Days in Inventory =
    17. 17. Basic Earnings Per Share <ul><ul><li>Net income (after tax) – Preferred dividends * </li></ul></ul><ul><ul><li>Weighted average outstanding common stock </li></ul></ul>Simple Capital Structure (Basic EPS) * Current period’s cumulative preferred stock dividends (whether or not declared) and noncumulative preferred stock dividends (only if declared). Number of shares outstanding × Number of months outstanding ÷ 12 Weighted average shares outstanding
    18. 18. Shareholder Return Ratios Market price per share Earnings per share = Price-Earnings Ratio Dividend per share Market price per share = Dividend Yield

    ×