CFA Level 1 Financial Ratios Sheet

Activity Ratios Solvency ratios Ratio calculation

Activity ratios measure how efficiently a company performs Total debt Debt-to- day-to-day tasks, such as the collection of receivables and Total assets management of . The table below clarifies how to Total debt Dept-to-capital calculate most of the activity ratios. Total debt + Total shareholders’ Total debt Dept-to-equity Total shareholders’ equity Activity Ratios Ratio calculation Average total assets Financial leverage of goods sold Total shareholders’ equity Average inventory

Number of days in period Days of inventory on hands (DOH) Coverage Ratios Ratio calculation Inventory turnover EBIT Revenue or Revenue from credit coverage Receivables turnover Interest payements Average receivables EBIT + Lease payements Number of days Fixed charge coverage Days of sales outstanding (DSO) Interest payements + Lease payements Receivable turnover

Purchases Payable Turnover Average payables Profitability Ratios Number of days in a period Number of days of payables Payable turnover Profitability ratios measure the company’s ability to Revenue generate profits from its resources (assets). The table below Working capital turnover Average working capital shows the calculations of these ratios. Revenue Fixed assets turnover Average fixed assets Return on sales ratios Ratio calculation Revenue Total assets turnover Average total assets Gross profit Gross profit margin Revenue

Operating profit Operating margin Liquidity Ratios Revenue EBT (Earnings Before Taxes) Pretax margin Liquidity ratios measure the company’s ability to meet its Revenue short-term obligations and how quickly assets are converted Net Net profit margin into . The following table explains how to calculate the Revenue major liquidity ratios.

Return on investment ratios Ratio calculation

Liquidity ratios Ratio calculation Operating income Opearting ROA Average total assets Current assets Current Current liabilities ROA Average total assets Cash + Short term marketable securities + Receivables Quick Current liabilities EBIT Return on total capital Debt + Equity Cash + Short term marketable securities Cash Current liabilities Net income ROE Average total equity Cash + Short term marketable securities + Receivables Defensive interval Net income - Preferred Daily expenditures Return on common equity Average common equity DOH + DSO - Number of days of payables

Valuation Ratios

Solvency Ratios ratios measure the quantity of an or flow Solvency ratios measure a company’s ability to meet long-term (i.e., earnings) associated with ownership of a specified claim obligations. Subsets of these ratios are also known as “leverage” (i.e., a share or ownership of the enterprise). The following and “long-term debt” ratios. tables show the most of the common valuation ratios.

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analystprep.com CFA Level 1 Financial Ratios Sheet

Valuation ratios Ratio calculation Price per share Ratio calculation

Price per share P/E FFO + Interest paid - Operatinf lease adjustments FFO (funds from operations) Gross interest (prior to deductions for capitalized Price per share interest coverage PC/F interest or interest income) Cash flow per share

Price per share P/S Sales per share EBIT Price per share Average capital P/BV per share where Capital = Equity + Non-current deffered taxes + Debt

FFO Price per share Ratio calculation FFO (Funds from operations) to debt Total debt

Net income - Preferred dividends CFO (adjusted) - Capital expenditures Basic EPS Free operating cash flow-to-debt Weighted average number of ordinary shares outstanding Total debt

CFO - Capital expenditures - paid Net income - Preferred dividends Discretionary cash flow-to-debt + Aftertax interest on ordinary shares outstanding Total debt Diluted EPS Weighted average number of ordinary shares outstanding FFO - Dividends + Number of common shares that would Net cash flow-to-capital expenditures have been issued at conversion Capital expenditures

CFO - Preferred dividends Cash flow per share Weighted average number of ordinary shares outstanding Leverage Ratios

EBITDA EBITDA per share Leverage ratios measure the extent to which a company uses Average number of common liabilities rather than equity to finance its assets Dividends paid Dividends per share Number of shares outstanding Leverage Ratios

Total debt A Dividend - related ratios Ratio calculation Debt-to-assets ratio Total assets

Common share dividends Total debt A Debt-to-capital ratio Net income attributable to common shares Total debt + Total equity

Total debt A Net income attributable to common shares Debt-to- Total equity Retention rate (b) - Common share dividends Net income attributable to common shares Average total assets Financial leverage ratio Average equity b x ROE A| Debt is defined as the sum of interest-bearing short-term and long-term debt.

Segment Ratios Solvency Ratios Segment ratios are important for segment reporting. Solvency ratios measure a company’s ability to meet long-term Remember that a company doesn’t have to disclose obligations. Subsets of these ratios are also known as “leverage” information about all of its segments; they only need to be and “long-term debt” ratios. disclosed if that segment constitutes 10 percent or more of the combined operating segments' revenue, assets, or profit. If the revenue of the reported segments is less than 75% of Price per share Ratio calculation the revenue of the entire company, more segments must be reported until the 75% level is reached. EBIT EBIT interest coverage Gross interest (prior to deductions for capitalized interest or interest income) Segment ratio Numerator Denominator Indication

Measures a segment’s Segment profit Segment margin Segment revenue profitability relartive to its (loss) revenues EBITDA EBITDA interest coverage Gross interest (prior to deductions for capitalized Measures a segment’s interest or interest income) Segment turnover Segment revenue Segment assets ability to generate revenue using assets

Measures a segment’s Segment profit Segment ROA Segment assets operating profitability (loss) relative its assets

Measures a segment Segmentt debt ratio Segment liabilities Segment assets solvency

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analystprep.com CFA Level 1 Financial Ratios Sheet

Performance Ratios

Performance ratios are based on CFO. CFO is operating cash flow under US GAAP or under IFRS, conditional to the fact that the company includes interest paid in operating activities.

Leverage Ratios Calculation Indication

CFO Operating cash generated per Cash flow to revenue Net revenue dollar of revenue

CFO Operating cash generated per Cash Average total assets dollar of asset investment

CFO Operating cash generated per Cash Average shareholders’ equity dollar of owner investment

CFO Cash to income Cash generated from operations Operating income

CFO - Pref.dividends Operating cash flow on a per Cash flow per share Number of common share basis shares outstanding

CFO Ability to pay debts with Debt payment Cash paid for long operating cash flows term debt repayment

CFO Ability to pay dividends with Dividend payment Dividends paid operating cash flows

CFO Ability to acquire assets, pay Investing and Financing Cash outflows for investing debts, and make distributions and financing activities to owners

CFO Financial risk and financial Debt Coverage Total debt leverage

CFO + Interest paid + Taxes paid Ability to meet interest Interest Coverage Interest paid obligations

CFO Ability to acquire assets with Reinvestment Cash paid for long term assets operating cash flows

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