1. MBU 652
Financial Decision
Making
Performance Measurements
Profitability, Liquidity, Activity, & Debt
(with answers to calculations for analyzing the
financial statements from textbook)

2. Categories of a Financial
Statement Analysis
 Profitability
 Liquidity
 Activity
 Debt (Leverage)

3. Profitability
 Return on Assets (ROA)
 Return on Equity (ROE)
 Price/Earnings Ratio(P/E Ratio)
 Dividend Yield
 Dividend Pay-Out Ratio

4. Return on Assets (ROA)
ROA = ____Net Income___
Average Total Assets
ROA = ____107.2___
1591.7 + 1599.3 / 2 =

5. Return on Equity (ROE)
ROE = ___Net Income___
Average Owners’ Equity
ROE = ___107.2___
908.7 + 983.8 / 2 =

6. Price/Earnings Ratio
(P/E Ratio)
P/E Ratio = Market Price of Common Stock
Earnings Per Share
P/E Ratio = 90.00_(Market Price)
2.50 (EPS)

7. Dividend Yield
Dividend Yield = Annual Dividend per share
Market Price Per Share
Dividend Yield = _____.50_____
90.00

8. Dividend Pay-Out Ratio
Dividend = Annual Dividend Per Share
Pay-Out Ratio Earnings Per Share
Dividend = _____.50_____
Pay-Out Ratio 2.50

9. Liquidity
 Working Capital
 Current Ratio
 Acid-Test Ratio

10. Working Capital
Current Assets
- Current Liabilities
Working Capital
672.4
- 205.1
467.3

11. Current Ratio
Current Ratio = __Current Assets__
Current Liabilities
Current Ratio = __672.4 __
205.1

12. Acid-Test Ratio
Acid-Test = Cash + Accounts Receivable
Ratio Current Liabilities
Acid-Test = _14.3 + 218.6_
Ratio 205.1

13. Activity
 Accounts Receivable Turnover
 Inventory Turnover

14. Accounts Receivable
Turnover (A/R)
A/R Turnover = ____Sales_____
Average A/R
A/R Turnover = ____1328.2____
200.2 + 218.6 / 2

15. Inventory Turnover
Inventory = Cost of Goods Sold (COGS)
Turnover Average Inventory
Inventory = _____876.4______
Turnover 390.0 + 392.2 / 2

16. Debt (Leverage)
 Debt Ratio
 Debt/Equity Ratio

17. Debt Ratio
Debt = ______Total Liabilities_______
Ratio Total Liabilities & Owners’ Equity
Debt = ______615.5_______
Ratio 1599.3

18. Debt/Equity Ratio
Debt/Equity = __Total Liabilities__
Ratio Total Owners’ Equity
Debt/Equity = __615.5__
Ratio 983.8