Show Menu
Cheatography

Financial Analysis Cheat Sheet by

Links Between Financial Statements

Liquidity Ratios

Current Ratio = Current Assets / Current Liabil­ities
Ability of the firm to cover its short term debts
Quick Ratio = Cash + cash equiv + receiv­ables / Curent Liabil­ities
Ability of the firm to cover its immediate short term debts
Cash Ratio = Cash + Cash Equiva­lents / Curent Liabil­ities
Measures cash available to pay short term debts

Working capital :
Margin of safety to pay current obliga­tions
Current assets – current liabil­ities

FCF

Free Cash Flow for a project or a firm: 
= Earnings Before­ In­terest and Taxes (EBIT)
x (1- tax rate) 
+ Deprec­iation
- Changes in working capita­l (­without cash)
- Replac­ement Invest­ments (Capex)
(+ Rec­eip­t from asset sale)

(Note: you can also get free cash flows from operating cash flows + investing cash flows – interest (1-tax%) and adjustment for divide­nds).

Solvency Ratios

Times Interest Earned = Net Income + Interest Exp. +Tax Exp. / Interest Exp.
Shows the firm’s ability to pay the cost of financing
Debt-t­o-E­quity Ratio = Total Liabil­ities / Shareh­older's Equity
Propo­rtion of debt for each “dollar” invested by shareh­olders
 

Balance Sheet

Income Statement

Profit Margin =
Net Income / Sales Revenue
% of each “dollar” of sales that remains as net income.
Quality of Income =
Cash Flow from Operating Activities / Net Income
Compares the cash flows earned (real) to net income declared (accou­nting princi­ples!)
Fixed Assets Turnover =
Net Sales Revenue / Average Net Fixed Assets
Shows the ability of the firm to use its fixed assets to generate revenue.
Return on Equity =
Net Income / Average Shareh­olders’ Equity
How much income was earned for every “dollar” invested by owners?

ROA (Dupont Chart)

SCF

 

Structure of Income Statement

Return on Asset Ratios

Profit Margin = EBIT x (1-tax) / Net Sales

Asset Turnover = Net Sales / Average Assets

ROA
= Profit margin x Asset turnover
= EBIT x (1-tax) / Average Assets

ROCE (return on capital employed) = EBIT x (1 – tax) / Capital Employed
Capital employed
= Total assets – short term liabil­ities OR
= Long term liabil­ities + Equity

Financial leverage: ROE – ROA
Shows the relati­onship between the return on assets (all forms of funding) and the return on equity (only shareh­older’s invest­ment).
Should be positive (indicates that the company creates a bigger return than the cost of borrow­ing).

When return on capital employed is more than the expected return on investment => Value Creation

Investor Ratios

EPS = Net Income* /Average Number of Shares Outsta­nding For The Period
Measures return on investment for shareh­old­ers.
*If there are preferred dividends, the amount is subtracted from net income.

Price-­to-­ear­nings ratio = Current Market Price Per Share / Earnings Per Share
Measures the relati­onship between the current share price and the earnings per share. Indicates market expect­ati­ons.

Help Us Go Positive!

We offset our carbon usage with Ecologi. Click the link below to help us!

We offset our carbon footprint via Ecologi
 

Comments

No comments yet. Add yours below!

Add a Comment

Your Comment

Please enter your name.

    Please enter your email address

      Please enter your Comment.