Financial Ratio Cheat Sheet PDF

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Summary

Finance cheat sheet...

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Asset Utilisation (Turnover/Efficiency Ratios) 1. Total Asset Turnover (TATO) – How efficiently a firm uses its Assets? = Sales/Total Assets (the higher the better)

2. Days Inventory Held (DIH) – How often does the firm’s inventories turn over during the year? = Inventory/COGS x 365 (the lower the better)

3. Days Sales Outstanding (DSO) – How long until debtors (firm’s customers) pay? = Acc Receivable/Sales x 365 (the lower the better)

4. Payables Payment Period (PPP) – How long until creditors (firm’s suppliers) are paid? = Acc Payables/COGS x 365 (the higher the better)

The Operating Cash Conversion Cycle

5. Days Sales Outstanding (DSO) + Days Inventory Held (DIH) - Payables Payment Period (PPP) (the lower the better; this means the fewer days it takes for a company to turn its core business activities (whatever they are) into cash the better!

The Operating Cash Conversion Cycle leads directly into calculating the Change in NonCash working Capital (ie, excluding changes in cash] from the current period to the last period. ie, Change in NCWC = (Change in Acc Receivables) + (Change in Inventories – (Change in Acc Payables))

*STUDENTS SHOULD 1. UNDERSTAND & 2. REMEMBER THIS EQUATION (5) AS IT WILL BECOME A KEY COMPONENT OF THE UPCOMING DCF VALUATION LECTURES…. IF YOU COMMIT THE TIME NOW, IT WILL PAY OFF MASSIVELY LATER!...