RSM332H1 Study Guide - Midterm Guide: Spot Contract, Debt Ratio, Severance Package
Document Summary
Having debt: ceo must make cash to meet interest payments. Severance packages to ensure that ceo does best job, even if doing so may not be optimal for career. Net income / total assets (return on assets) * total assets / shareholder"s equity (leverage ratio) Net income/ revenues (net profit margin) * revenues / total assets (turnover ratio) = net income. Roe = net profit margin * turnover ratio * leverage ratio. Debt to equity ratio = debt / shareholder"s equity. Cash flow to debt ratio = cash flow from operating / debt. Degree of total leverage = contribution margin / earnings before taxes. Gross profit margin = 1 cost of sales/revenue. Receivables turnover ratio = revenue / accounts receivable. Average collection period = 365 / receivables turnover. Inventory turnover = cost of sales / inventory or revenue/inventory. Fixed asset turnover ratio = revenue / net fixed assets. Working capital ratio = current assets / total assets.
