E13-5 Matching Each Ratio with Its Computational Formula LO 13-4, 13-5, 13-6, 13

Question

E13-5 Matching Each Ratio with Its Computational Formula LO 13-4, 13-5, 13-6, 13-7 Match each definition with its related ratios or percentages by selecting the appropriate letter in the drop down provided. Definitions: Ratios or Percentages Definitions A. Net Income (before extraordinary items) ÷ Net Sales 1 Profit margin B. Days in Year ÷ Receivable Turnover ratio 2 Inventory turnover ratio C. Net Income ÷ Average Stockholders’ Equity 3 Average collection period D. Net Income ÷ Average Number of Shares of Common Stock Outstanding 4 Dividend yield ratio E. Return on Equity Return on Assets 5 Return on equity F. Quick Assets ÷ Current Liabilities 6 Current ratio G. Current Assets ÷ Current Liabilities 7 Debt-to-equity ratio H. Cost of Goods Sold ÷ Average Inventory 8 Price/earnings ratio I. Net Credit Sales ÷ Average Net Receivables 9 Financial leverage percentage E J. Days in Year ÷ Inventory Turnover Ratio 10 Receivable turnover ratio K. Total Liabilities ÷ Stockholders’ Equity 11 Average days’ supply of inventory L. Dividends per Share ÷ Market Price per Share 12 Earnings per share M. Market Price per Share ÷ Earnings per Share 13 Return on assets N. [Net Income + Interest Expense (net of tax)] ÷ Average Total Assets 14 Quick ratio O. Cash from Operating Activities (before interest and taxes) ÷ Interest Paid 15 Times interest earned P. Net Sales Revenue ÷ Net Fixed Assets 16 Cash coverage ratio Q. (Net Income + Interest Expense + Income Tax Expense) ÷ Interest Expense 17 Fixed asset turnover ratio E13-5 Matching Each Ratio with Its Computational Formula LO 13-4, 13-5, 13-6, 13-7 Match each definition with its related ratios or percentages by selecting the appropriate letter in the drop down provided. Definitions: Ratios or Percentages Definitions A. Net Income (before extraordinary items) ÷ Net Sales 1 Profit margin B. Days in Year ÷ Receivable Turnover ratio 2 Inventory turnover ratio C. Net Income ÷ Average Stockholders’ Equity 3 Average collection period D. Net Income ÷ Average Number of Shares of Common Stock Outstanding 4 Dividend yield ratio E. Return on Equity Return on Assets 5 Return on equity F. Quick Assets ÷ Current Liabilities 6 Current ratio G. Current Assets ÷ Current Liabilities 7 Debt-to-equity ratio H. Cost of Goods Sold ÷ Average Inventory 8 Price/earnings ratio I. Net Credit Sales ÷ Average Net Receivables 9 Financial leverage percentage E J. Days in Year ÷ Inventory Turnover Ratio 10 Receivable turnover ratio K. Total Liabilities ÷ Stockholders’ Equity 11 Average days’ supply of inventory L. Dividends per Share ÷ Market Price per Share 12 Earnings per share M. Market Price per Share ÷ Earnings per Share 13 Return on assets N. [Net Income + Interest Expense (net of tax)] ÷ Average Total Assets 14 Quick ratio O. Cash from Operating Activities (before interest and taxes) ÷ Interest Paid 15 Times interest earned P. Net Sales Revenue ÷ Net Fixed Assets 16 Cash coverage ratio Q. (Net Income + Interest Expense + Income Tax Expense) ÷ Interest Expense 17 Fixed asset turnover ratio

Explanation / Answer

Definitions: Ratios or Percentages Definitions A. Net Income (before extraordinary items) ÷ Net Sales 1 Profit margin A B. Days in Year ÷ Receivable Turnover ratio 2 Inventory turnover ratio H C. Net Income ÷ Average Stockholders’ Equity 3 Average collection period B D. Net Income ÷ Average Number of Shares of Common Stock Outstanding 4 Dividend yield ratio L E. Return on Equity Return on Assets 5 Return on equity C F. Quick Assets ÷ Current Liabilities 6 Current ratio G G. Current Assets ÷ Current Liabilities 7 Debt-to-equity ratio K H. Cost of Goods Sold ÷ Average Inventory 8 Price/earnings ratio M I. Net Credit Sales ÷ Average Net Receivables 9 Financial leverage percentage E J. Days in Year ÷ Inventory Turnover Ratio 10 Receivable turnover ratio I K. Total Liabilities ÷ Stockholders’ Equity 11 Average days’ supply of inventory J L. Dividends per Share ÷ Market Price per Share 12 Earnings per share D M. Market Price per Share ÷ Earnings per Share 13 Return on assets N N. [Net Income + Interest Expense (net of tax)] ÷ Average Total Assets 14 Quick ratio F O. Cash from Operating Activities (before interest and taxes) ÷ Interest Paid 15 Times interest earned O P. Net Sales Revenue ÷ Net Fixed Assets 16 Cash coverage ratio Q Q. (Net Income + Interest Expense + Income Tax Expense) ÷ Interest Expense 17 Fixed asset turnover ratio P

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