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FINANCIAL REPORTING
• Solvency Ratios
Ratio Numerator Denominator
AND ANALYSIS Debt-to-assets ratio Total debt Total assets
Total debt + total
Debt-to-capital ratio Total debt
shareholders’ equity
• Basic EPS:
(Net income – Preferred dividends) Total shareholders’
= _____________________________________________
Weighted average number of shares outstanding (WASO)
Debt-to-equity ratio Total debt
equity
Financial leverage
• Calculation of Diluted EPS: Average total assets Average total equity
ratio
Security Formula Interest coverage EBIT Interest payments
Net income
__________________________________ Fixed charge EBIT + Lease Interest payments +
Convertible WASO + New common shares that would coverage payments Lease payments
preferred shares have been issued at conversion
Cash + Short-term
Cash ratio Current liabilities
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ALTERNATIVE INVESTMENTS
marketable investments
Defensive
Cash + Short-term
Daily cash
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marketable investments +
interval ratio expenditures
Receivables • Commodity futures price = Spot price (1 + Risk free rate) +
Cash conversion Storage costs – Convenience yield
cycle (net DOH + DSO – Number of days of payables
• Contango: Futures price > Spot price
operating cycle) Fitch Learning is a member of the CFA Institute
• Backwardation:
Approved Prep Provider Futures
Program. price < Spot price
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