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- Define each of the following terms: Liquidity ratios: current ratio; quick, or acid test, ratio Asset management ratios: inventory turnover ratio; days sales outstanding (DSO); fixed assets turnover ratio; total assets turnover ratio Financial leverage ratios: debt ratio; times-interest-earned (TIE) ratio; EBITDA coverage ratio Profitability ratios: profit margin on sales; basic earning power (BEP) ratio; return on total assets (ROA); return on common equity (ROE) Market value ratios: price/earnings (P/E) ratio; price/cash flow ratio; market/book (M/B) ratio; book value per share Trend analysis; comparative ratio analysis; benchmarking DuPont equation; window dressing; seasonal effects on ratiosyou have been provided with the following data D1=$1.27 PO=60 and G=8 constant. What is the cost of equity from retained earnings based on the DCF approach?Which one of the following formulas is correct? O i) Profit margin = EBIT / Sales ii) ROA = ROE / Equity multiplier %3D O ii) Capital intensity ratio = 1 / Return on assets O iv) Quick ratio = Cash / Current liabilities
- Which financial ratio does the DuPont equation help to explain? ROA (return on assets) ROE (return on equity) EPS (earnings per share) DPS (dividends per share)An increase in which of the following will increase the return on equity, all else constant?I. salesII. net incomeIII. depreciationIV. total equityc. Explain the following Investment ratios and indicate how they are computed:Earnings per share (EPS) and Price/Earnings ratio (P/E).
- Return on Capiatal employed = O a. Return on Total Assets O b. Return on Equity Oc. Return on Investment O d. Return on Equity CapitalReturn on equity (ROE) using the traditional DuPont formula equals to A. (net profit margin) (interest component) (solvency ratio) B. (net profit margin) (interest component) (liquidity ratio) C. (net profit margin) (total asset turnover) (quick ratio) D. (net profit margin) (total asset turnover) (solvency ratio)What are the importance of the following financial ratios? • Price to earnings ratio. • Earnings per share. Note: Own answer •Return on equity ratio.
- formula for the following:1. price earnings ratio2. dividend yield ratio3. dividend payout ratio4. interest earned per share ratio5. book value per share ratio6. times interest earned ratioUse the information provided from Sapphire Ltd calculate and comment on the following ratios:1. Profit margin2. Return on equityCalculate the following profitablity leverage management ratios a. Gross profit margin b. Net profit margin c. Return on investment d. Return on Stockholders' equity Calculate the following market-based ratios: a. Price-to-earnings ratio b. Market price-to-book value ratio