1. Apart from using ratios we should also use the disaggregated ratios to understand the companys situation e.

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understand the performance of a company in different business units help us understand if the compays
strategy is working for all aspects of the business and also pin point areas where it is not have a huge impact. For
newer companies we should focus on eth physical data pertaining to companys operations e.g. per store sales,
sales per sqr. Mtr., customer transactions per store. Etc .
2. Asset Turnover: - Sales/Total Assets.
3. Book basis unamortized cost of an item for financial reporting
4. Book Income Financial statement income
5. Capital Leases: - A lease considered to have the economic characteristics of asset ownership. Lease considered
capital or purchased if the following criteria fulfilled.
6. Coverage ratio : - If the firm is generating enough cash to meet its interest expenses. Coverage ratio of 1 implies
that the firm is barely able to meet its interest obligations. .
Current performance into future as it reflects margins from core business activities of the firm.
7. Days receivable: - Trade receivebles/Average sales per day
8. Days Inventories: -Inventories/ Average cost of sales per day
9. Days Payable: - Trades Payable/ Average purchases per day or TP/Avg. cost of sales per day
a. Deferred tax Asset: - We look at prepaid revenues received, Fin accounting accrue as we use it but
for tax accounting we record it as we receive the cash. We would end up paying more in the first
year. We also calculate the difference between the Taxes payable and Tax expenses. We have
already paid taxes in eth first year and that is greater than the taxes we will be paying in the later
years to come ( also less than the tax expense.) hence DTA
b. Deferred tax liability : - Taxes payable Taxes expense. We consider depreciation here in DTL
accounts. If Taxes payables( Tax reporting) > Tax Expenses (Fin accounting) then the Dr. Deferred TL
and vice versa.
10. Deferred taxes : - Income tax payable is not equal to income tax expense.
11. Dividend payout Cash dividends paid/net profit
12. EBITDA Margin = EBITDA/Sales. Doesnt include Dep. and Amor, not actual measure of cash as some
expenses include non-cash items.
13. Inventories Turnover: - Cost of Sales / Inventories or Cost of materials /Inventories.
14. Net Non-current operating assets : - ( Total non-current operating assets - non-interest bearing non-current
liabilities)
15. Net Non-current operating assets turnover : - sales/ net non-current operating assets
16. Non-Current Operating assets : - generally consist of PP&E intangible assets i.e. goodwill, and derivatives used to
hedge operating risks
17. Non-interest bearing non-current liabilities: - include (net) deferred taxes.
18. NOPAT = Net operating income investment profit + interest expense.
19. NOPAT Margin = NOPAT/Sales. Indication of the operating performance of the company.
20. Operating leases: - A contract that allows for the use of an asset, but does not convey rights of ownership of the
asset. An operating lease is not capitalized; it is accounted for as a rental expense in what is known as "off
balance sheet financing
21. Operating WC to sales: - OWC (Operating working capital) /Sales.
22. Operating working capital: - (Current assets excess cash and MS) - (Current liabilities- current debt and current
portion of LTD)
23. OWC to sales turnover: - Sales/ OWC
24. Recurring NOPAT = Subtract non-operating income /expenses from NOPAT. Better benchmark for extrapolating
25. Return on operating assets Net Income / Operating Assets
26. Return On sales (ROS): - Net income (before taxes & interest)/sales. It is also called operating profit margin.
27. Spread Return on business asset effective interest rate after tax.
28. Sustainable growth rate: - ROE x (1-dividend payout ) a rate at which the firm can grow while keeping its
financiasl policies and profitability unchanged.
29. Tax basis unamortized cost of an item for tax reporting
30. Taxable income Income on the tax return
a. The lease contains a purchase agreement for less than market value.
b. The lessee gains ownership at the end of the lease period.
c. The life of the lease is 75% or greater of the assets useful life.
d. The present value of lease payments is greater than 90% of the asset's market value.
31. Trade receivable turnover: Sales / trade receivables.
32. Trades Payable Turnover : - Purchases/ Trades payable, Cost of Sales/ Trades Payable, Cost of material/TP
33. Working capital: Current Assets Current Liabilities.
34. Investment assets : - Investment assets in the financial markets are securities designed to generate profits.
They are grouped in categories known as asset classes, and might be divided into stocks, bonds,
commodities and currencies.
35. Average interest rate after tax : -