Understanding Key Financial Ratios and Benchmarks
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CFA Level 1 Financial Ratios Sheet
CFA Level 1 Financial Ratios Sheet Activity Ratios Solvency ratios Ratio calculation Activity ratios measure how efficiently a company performs Total debt Debt-to-assets day-to-day tasks, such as the collection of receivables and Total assets management of inventory. The table below clarifies how to Total debt Dept-to-capital calculate most of the activity ratios. Total debt + Total shareholders’ equity Total debt Dept-to-equity Total shareholders’ equity Activity Ratios Ratio calculation Average total assets Financial leverage Cost of goods sold Total shareholders’ equity Inventory turnover 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 sales Interest 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 income Net profit margin into cash. The following table explains how to calculate the Revenue major liquidity ratios. -
FS Double Dividend and Revenue Neutrality 01 02
Low Carbon Green Growth Roadmap for Asia and the Pacific FACT SHEET Figure 1: The double dividend through environmental tax and fiscal reforms Double dividend and revenue neutrality Key point • Double dividend and revenue neutrality principles enhance effectiveness, public acceptance and feasibility of environmental tax and fiscal reform measures. Double dividend and revenue neutrality explained The double dividend hypothesis states that a revenue neutral restructuring of the tax system, whereby green taxes are increased in proportion to a decrease in traditional taxes (income tax), could not only improve envi- ronmental quality (the first dividend) but also reduce the distortion of the tax system and the cost of labour, The prospects for winning the double dividend varies from country to country and depends on the structure of subsequently generating higher levels of employment (second dividend). relative preferences (the demand elasticity for ‘dirty’ goods and resources) and infrastructure available, the levels of investment in environmental research and development and the low use of distorting non- Revenue neutrality is a fiscal policy tool that can be used to overcome political resistance to an increase in envi- environmental taxes. ronmental taxes by seeking to have the same proportional reduction in income tax, pension contributions or possibly even value-added taxes (VAT), while striving to maintain a net-zero increase in the overall taxation of the It is also important to carefully design a supporting policy system, including regulations and investment environ- economy. ment, that will create incentives for a change of consumers towards environment-friendly consumption and to provide alternatives to more resource-inefficient lifestyles. -
Reading and Understanding Nonprofit Financial Statements
Reading and Understanding Nonprofit Financial Statements What does it mean to be a nonprofit? • A nonprofit is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. • The mission of the organization is the main goal, however profits are key to the growth and longevity of the organization. Your Role in Financial Oversight • Ensure that resources are used to accomplish the mission • Ensure financial health and that contributions are used in accordance with donor intent • Review financial statements • Compare financial statements to budget • Engage independent auditors Cash Basis vs. Accrual Basis • Cash Basis ▫ Revenues and expenses are not recognized until money is exchanged. • Accrual Basis ▫ Revenues and expenses are recognized when an obligation is made. Unaudited vs. Audited • Unaudited ▫ Usually Cash Basis ▫ Prepared internally or through a bookkeeper/accountant ▫ Prepared more frequently (Quarterly or Monthly) • Audited ▫ Accrual Basis ▫ Prepared by a CPA ▫ Prepared yearly ▫ Have an Auditor’s Opinion Financial Statements • Statement of Activities = Income Statement = Profit (Loss) ▫ Measures the revenues against the expenses ▫ Revenues – Expenses = Change in Net Assets = Profit (Loss) • Statement of Financial Position = Balance Sheet ▫ Measures the assets against the liabilities and net assets ▫ Assets = Liabilities + Net Assets • Statement of Cash Flows ▫ Measures the changes in cash Statement of Activities (Unaudited Cash Basis) • Revenues ▫ Service revenues ▫ Contributions -
[3] Appendix C—Financial Ratios, Formulas, and Interpretation
The Basics of Construction Accounting Workshop Key Financial Ratios One key element in any financial analysis is the comparison of financial ratios; however, mere comparison to industry averages may have limited value. The real usefulness lies in comparing individual ratios to each other over time. For instance, an analysis that explains a change in the current ratio over the past two years will be more useful than an explanation of the variance between a company’s current ratio and a published “industry average” current ratio. Industry averages of various ratios can be useful as a beginning bench- mark for comparison purposes and as an indication of industry competition. The interpretation of financial ratios provided on the following pages is not intended to represent all possible interpretations and is only an example of how these ratios may be used. There may be other interpretations of these financial ratios. (From Financial Management & Accounting for the Construction Industry, CFMA; Chapter 1. © 2010 Matthew Bender and Company, Inc., a member of the LexisNexis Group. For permission to reprint, contact [email protected].) LIQUIDITY RATIOS Ratio Formula Interpretation Indicates the extent to which current assets are Current Ratio Current Assets available to satisfy current liabilities. Usually stated Current Liabilities in terms of absolute values (i.e., “2.1 to 1.0” or simply “2.1”). Generally, a minimum current ratio is 1.0, which indicates that current assets at least equal current liabilities. (Cash and Cash Equivalents Indicates the extent to which the more liquid assets Quick Ratio + Short-Term Investments are available to satisfy current liabilities. -
Financial Ratios Ebook
The Corporate Finance Institute The Analyst Trifecta Financial Ratios eBook For more eBooks please visit: corporatefinanceinstitute.com/resources/ebooks corporatefinanceinstitute.com [email protected] 1 Corporate Finance Institute Financial Ratios Table of Contents Financial Ratio Analysis Overview ............................................................................................... 3 What is Ratio Analysis? .......................................................................................................................................................................................................3 Why use Ratio Analysis? .....................................................................................................................................................................................................3 Types of Ratios? ...................................................................................................................................................................................................................3 Profitability Ratio .......................................................................................................................... 4 Return on Equity .................................................................................................................................................................................................................5 Return on Assets .................................................................................................................................................................................................................6 -
Publication 538, Accounting Periods and Methods
Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 10 Draft Ok to Print AH XSL/XML Fileid: … ons/P538/201901/A/XML/Cycle04/source (Init. & Date) _______ Page 1 of 21 15:46 - 28-Feb-2019 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Contents Internal Revenue Service Future Developments ....................... 1 Publication 538 Introduction .............................. 1 (Rev. January 2019) Photographs of Missing Children .............. 2 Cat. No. 15068G Accounting Periods ........................ 2 Calendar Year .......................... 2 Fiscal Year ............................. 3 Accounting Short Tax Year .......................... 3 Improper Tax Year ....................... 4 Periods and Change in Tax Year ...................... 4 Individuals ............................. 4 Partnerships, S Corporations, and Personal Methods Service Corporations (PSCs) .............. 5 Corporations (Other Than S Corporations and PSCs) .............................. 7 Accounting Methods ....................... 8 Cash Method ........................... 8 Accrual Method ........................ 10 Inventories ............................ 13 Change in Accounting Method .............. 18 How To Get Tax Help ...................... 19 Future Developments For the latest information about developments related to Pub. 538, such as legislation enacted after it was published, go to IRS.gov/Pub538. What’s New Small business taxpayers. Effective for tax years beginning -
Demand Dividend: Creating Reliable Returns in Impact Investing
Demand Dividend: Creating Reliable Returns in Impact Investing June, 2013 Demand Dividend is a debt vehicle designed to improve the repayment cycle for impact investors and ease capital access for social enterprises. Demand Dividend grew out of the need to find alternatives to debt, convertible debt, and equity as funding mechanisms for social enterprises. Demand Dividend has four key features: Key Characteristic Demand Equity Debt Revenue Dividend Royalty A structure designed to enable successful capital exit (a “round X X X trip”) Payments linked to the enterprise’s ability to pay X A return profile commensurate with investor risk in frontier X X X enterprises Incentives to align investor and entrepreneur interests X Demand Dividend is designed to enable investors to generate a reliable, reasonable return while allowing social entrepreneurs to maintain control and efficiently deploy capital. Impact Investing Issues Impact investors targeting small, growing businesses (SGBs) face a variety of issues. In our view, the most relevant are: Underperformance on the return promise. • Exits from equity or convertible debt deals have been rare, • Reliance on the venture capital approach of generating a few “big wins” has not materialized, and • Investable enterprises have been “screened out” due to high portfolio return hurdles. Misalignment of investor and SE incentives. • Exit preferences may be in conflict: the investor prefers a buyout or IPO while the SE desires family or community control, and • Views may diverge on the importance of reliable financials and meeting projections. Scarcity of capital targeting frontier economy SGBs. • Traditional debt or equity instruments are not appropriate; debt does not compensate for risk, and equity lacks a defined liquidity event, and • Relatively fixed due diligence costs are hard to justify for $20,000 to $250,000 investments. -
Cost Revenue & Profit Functions
COST, REVENUE AND PROFIT FUNCTIONS Cost functions Cost is the total cost of producing output. The cost function consists of two different types of cost: - Variable costs - Fixed costs. Variable cost varies with output (the number of units produced). The total variable cost can be expressed as the product of variable cost per unt and number of units produced. If more items are produced cost is more. Fixed costs normally donot vary with output. In general these costs must be incurred whether the items are produced or not. Cost Function C(x) = F +V풙 C = Total cost F = Fixed cost V = Variable cost Per unit 풙 = No of units produced and sold It is called a linear cost function. Revenue Function Revenue is the total payment received from selling a good or performing a service. The revenue function, R(풙), reflects the revenue from selling “풙” amount of output items at a price of “p” per item. 푹(풙) = 풑풙 Profit Functions The Profit function P(풙) is the difference between the revenue function R(x) and the total cost function C(풙) Thus P(풙) = R(풙) – C(풙) 푷풓풐풇풊풕=푹풆풗풆풏풖풆−푪풐풔풕 Profit = Revenue − Cost P = R − C 1 Examples 1. Assume that fixed costs is Rs. 850, variable cost per item is Rs. 45, and selling price per unit is Rs. 65. Write, i. Cost function ii. Revenue function iii. Profit function i. Cost Function = Variable cost + Fixed cost = 45풙 + 850 ii. Revenue function = 65풙 iii. Profit function = R(풙) – TC(풙) = 65풙 – (45풙+850) = 20풙 – 850 2. -
A Roadmap to the Preparation of the Statement of Cash Flows
A Roadmap to the Preparation of the Statement of Cash Flows May 2020 The FASB Accounting Standards Codification® material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission. This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances. As used in this document, “Deloitte” means Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Copyright © 2020 Deloitte Development LLC. All rights reserved. Publications in Deloitte’s Roadmap Series Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. -
Notice of Intent
RULE Cynthia Bridges Secretary Department of Revenue 0110#028 Policy Services Division Inventory Tax Credit (LAC 61:I.1902) Under the authority of R.S. 47:6006 and R.S. 47:1511 and in accordance with the provisions of the Administrative Procedure Act, R.S. 47:950 et seq., the Department of Revenue, Policy Services Division, has adopted LAC 61:I.1902 relative to the application of inventory tax credits to different business associations. Act 153 of the 1991 Regular Session of the Louisiana Legislature enacted R.S. 47:6005 to allow a credit against the corporate and personal income taxes and the corporation franchise tax for ad valorem taxes paid to political subdivisions on inventory held by manufacturers, distributors, and retailers. The section was redesignated as R.S. 47:6006 pursuant to the statutory revision authority of the Louisiana State Law Institute. This rule clarifies the application of inventory tax credits to different business associations. Title 61 REVENUE AND TAXATION Part I. Taxes Collected and Administered by the Secretary of Revenue Chapter 19. Miscellaneous Tax Exemptions § 1902. Inventory Tax Credits A. Tax Credits for Local Inventory Taxes Paid. R.S. 47:6006 allows a credit for ad valorem taxes paid to local governments on inventory held by manufacturers, distributors, and retailers. B. Application to Corporations. All entities taxed as corporations for Louisiana income or corporation franchise tax purposes shall claim any credit allowable for inventory taxes paid by them on their corporation income and corporation franchise tax return. This includes, but is not limited to: 1. S corporations; 2. -
Financial Ratio Standard Formula Description
141 N. Glendale Ave., Suite 346 Innovation, Performance and Audit Glendale, CA 91206 Department glendaleca.gov REPORT#: 2018-03 February 7, 2018 Onnig Bulanikian, Director Community Services and Parks Department Re: Community Development Block Grant (CDBG) – Financial Ratio Calculation Dear Onnig, In accordance with Internal Audit’s fiscal year 2017-18 audit work plan, Internal Audit calculated financial ratios for the CDBG community agency applicants as reflected in Exhibit A, attached. These ratios were computed from the financial statements submitted by fiscal year 2018-19 CDBG applicants and furnished to Internal Audit by department management. No additional procedures were performed by Internal Audit to verify the accuracy of the financial information received. Internal Audit has taken care in selecting ratios to calculate that are practical for operations in a non-profit environment. The ratios presented are meant to provide the CDBG Advisory Committee with an additional tool to utilize while deliberating on funding decisions for the coming year. It is important to note that by calculating the financial ratios, Internal Audit is not expressing an opinion on the financial health of any agency requesting funding. Descriptive information and the standard formula for each ratio calculated are shown in the following table: Financial Ratio Standard Formula Description Reflects the organization’s ability to meet short term obligations. Current Ratio A ratio of 1 or greater is a good sign suggesting that an entity would be able to pay off its obligations if they came due. Financial Ratio Standard Formula Description Reflects the proportion of debt an organization has relative to its assets. -
Leverage, Earning Per Share and Profitability: a Study on Infrastructure Companies Listed at Idx from Year 2015-2018
SCIENTIFIC JOURNAL OF REFLECTION: p-ISSN 2615-3009 Economic, Accounting, Management and Business e-ISSN 2621-3389 Vol. 4, No. 2, April 2021 LEVERAGE, EARNING PER SHARE AND PROFITABILITY: A STUDY ON INFRASTRUCTURE COMPANIES LISTED AT IDX FROM YEAR 2015-2018 James Benjamin Soeindoen1, Harlyn Lindon Siagian2 Universitas Advent Indonesia, Bandung [email protected], [email protected] Submitted: 16th Feb 2021/ Edited: 27th Mar 2021/ Issued: 01st Apr 2021 Cited on: Soeindoen, J. B. & Siagian, H. L. (2021). LEVERAGE, EARNING PER SHARE AND PROFITABILITY: A STUDY ON INFRASTRUCTURE COMPANIES LISTED AT IDX FROM YEAR 2015-2018. SCIENTIFIC JOURNAL OF REFLECTION: Economic, Accounting, Management and Business, 4(2), 351-360. ABSTRACT To measure company performance, use financial ratio analysis to find out several aspects that determine the financial position and company development, one of which is profitability ratios. This study aims to determine the effect of leverage and earnings per share on profitability. The variable leverage (DER) and earnings per share (EPS) as independent variables (independent) and profitability (ROE) as independent variables (dependent). The number of samples used in this study was 48 there are infrastructure companies in the energy sub-sector (6), toll roads, airports, ports, and the like (5), and telecommunications (8) registered on the IDX, the company provides financial reports and annual reports in 2015-2018. Data were collected using a purposive sampling method based on certain conditions. The method in this study uses a non-participant observation method or used secondary data. Data were analyzed using linear regression models. The results show that leverage does not oppose profitability, while earnings per share tend to profitability.