Matching Each Ratio with its Computational Formula
Match each ratio or percentage with its computation.
| Ratios or Percentages |
| Definitions |
1. | Profit margin | A. | Net income ÷ Net Sales |
2. | Inventory turnover ratio | B. | Days in Year ÷ Receivable Turnover ratio |
3. | Average collection period | C. | Income Average ÷ Stockholders' Equity |
4. | Dividend yield ratio | D. | Income Average ÷ Number of Shares of Common |
5. | Return on equity |
| Stock Outstanding |
6. | Current ratio | E. | Return on Equity ÷ Return on Assets |
7. | Debt-to-equity ratio | F. | Quick Assets ÷ Current Liabilities |
8. | Price/earnings ratio | G. | Current Assets ÷ Current Liabilities |
9. | Financial leverage percentage | H. | Cost of Goods Sold ÷ Average Inventory |
10. | Receivable turnover ratio | I. | Net Credit Sales ÷ Average Net Receivables |
11. | Average days' supply of inventory | J. | Days in Year ÷ Inventory Turnover ratio |
12. | Earnings per share | K. | Total Liabilities ÷ Stockholders' Equity |
13. | Return on assets | L. | Dividends per Share ÷ Market Price per Share |
14. | Quick ratio | M. | Current Market Price per Share ÷ Earnings per Share |
15. | Times interest earned | N. | [Net income + Interest Expense (net of tax)] ÷ |
16. | Cash coverage ratio |
| Average Total Assets |
17. | Fixed asset turnover ratio | O. | Cash from Operating Activities (before interest |
|
|
| and taxes) ÷ Interest Paid |
|
| P. | Net Sales Revenue ÷ Average Fixed Assets |
|
| Q. | (Net Income + Interest Expense + Income Tax |
|
|
| Expense) ÷ Interest Expense |
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