Question

Complete the table below by filling in the Formula blank with the letter that corresponds to the correct formula for each ratio and filling in the Interpretation blank with the letter that corresponds to the interpretation provided. Not all ratio formulas and interpretations will be used.


Ratio Formula Interpretation
1. Price Earnings Ratio
2. Earnings per Share
3. Return on Equity

Ratio Formulas

A. 365 Inventory Turnover

B. (Sales Cost of Goods Sold) Sales

C. Net Income Sales

D. Net Operating Income Interest Expense

E. (Net income Preferred dividends) Average number of common shares outstanding

F. Total Liabilities Total Assets

G. Current stock price (per share) Earnings per Share

H. (Net income Preferred dividends) Average common stockholders equity

Ratio Interpretations

A. The portion of sales that is attributable to merchandise profit.

B. Ability of a company to pay its short-term debts as they come due.

C. The percent of each sales dollar that is left over after covering costs and expenses.

D. How many times more than the current years earnings investors are willing to pay for a companys common stock

E. Ability of a company to quickly pay its short-term debts as they come due.

F. The portion of a companys total financing that comes from debt.

G. The amount of income generated for each share of common stock owned by stockholders

H. How effectively a company is using its assets to generate revenue.

I. The amount of income earned for each dollar of common stockholders equity.

Answer

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