CFA Level 1

Financial Ratios Sheet

Activity Ratios
Solvency ratios Ratio calculation

Activity ratios measure how efficiently a company performs Debt-to-assets

Total debt

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 Coverage Ratios Ratio calculation

Days of inventory on hands (DOH)
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
into cash. The following table explains how to calculate the Net profit margin
Revenue
major liquidity ratios.
Return on investment ratios Ratio calculation

Liquidity ratios Ratio calculation Operating income

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

Valuation Ratios
Solvency Ratios Valuation ratios measure the quantity of an asset 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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Financial Ratios Sheet

Valuation ratios Ratio calculation Price per share Ratio calculation

Price per share

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

Price per share

P/S
Sales per share EBIT
Price per share Return on capital Average capital
P/BV
Book value 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 - Dividend 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 stock
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

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

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

Measures a segment
Segmentt debt ratio Segment liabilities Segment assets solvency

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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 return on assets
Average total assets dollar of asset investment

CFO Operating cash generated per

Cash return on equity
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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