Financial Ratios Asset Management

[@MartinvanSon]

Hi Kevin, why do you devide the accounts receivable by 360 in stead of 365 day's a year..? The rest is very helpfull, thx. Martin. (Netherlands)

[@kevinbracker]

Some textbooks calculate the Inv. Turnover ratio as you describe. Either approach (or using revenues divided by average inventory) are all acceptable. You could make an argument over which is theoretically the best, however what is more important is consistency. As long as you use the same approach over time and across companies for your trend and comparative analysis, there will be little difference in the interpretation of what the results regardless of which variation you use.

[@kevinbracker]

360 is commonly used in this ratio instead of 365. As far as I know, this is a carryover from pre-calculator/computer era for ease of calculations. If you are doing it for a class, just be sure to set it up like the instructor or book you are using states. If you are doing it on your own, feel free to use 365 as long as you do so consistently.

[@kevinbracker]

I would not think that inventory turnover would be a big deal for software companies, however ROA, ROE and leverage (gearing) ratios would be important. It is valuable to understand how much of the profitability is coming from core profitability (ROA) and how much is coming from leverage (the difference between ROE and ROA). Not that leverage is bad, just that it increases the risk. Market price is not needed for EPS. EPS is Net Income/Shares Outstanding. The PE ratio uses price/EPS.

[@aliciac5556]

Hi Kevin, Your videos are so good for revision. Can you please kindly advise if a software companies like SAGE, SDL, Oracle and etc needs to calculate inventory turnover, ROE, ROCE and Gearing ratio? What are the best profitability, liquidity and investor ratios recommended to analyse software companies? Besides that, I also have problems identifying market price to calculate EPS. Please kindly advise. Thank you. Alicia

[@kevinbracker]

Book value is the owner's (common) equity which should (if there is no preferred stock) also equal Assets less Liabilities. For a per share basis, divide this by the number of shares outstanding. As a side note, in practice when calculating EPS you want to use the weighted average shares outstanding. I skip over this and just provide a single value as my focus is on an introductory class.

[@sphinxhashweed]

Wonderful sir, a good explanation! God its an 11 years old video hope you're doing well!

[@kevinbracker]

Still alive and well...probably need to get an update of some of these older ones out there.

[@jacobson00]

can you calculate the ROA with the profit margin and fixed asset turnover ratio only?

[@rabi7010]

Hello Kevin. please assist. how do I get the total asset turnover ratio when provided the following information? Profit for the year R69000, Sales R575000, ROE 14.5% and an equity multiplier of 2.

[@kevinbracker]

I don't think so, however if you have total asset turnover instead of fixed asset turnover you can. ROA = Net Income/Total Assets PM = Net Income/Sales TAT = Sales/Total Assets So take PM times TAT and sales will cancel out leaving you Net Income/Total Assets (or ROA).

[@Godpickinie]

Hi, I am having difficulty with figuring out what figures to use on the Balance Sheet to calculate the earnings per share, the price earnings ratio and the market book. The formula indicates that the market value is Market price per share /Book value per share., but i dont know which figure is the book value. Can you help me please?

[@nomvuyongema4022]

is the "Net Fixed Asset" on Cost or Carrying value????

[@fahad7957927]

hey hi could you please tell me what do fixed assets turnover and inventory turnover mean? thanks

[@summerwarmth7931]

why don't you just do with financial statement form? the fking financial statement does not show "Net Fixed Assets" this kind of words