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Abbreviation for Ima

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  • June 2012
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CMA EXAM RATIO DEFINITIONS Abbreviations EBIT = Earnings before interest and taxes EBITDA = Earnings before interest, taxes, depreciation and amortization EBT = Earnings before taxes EPS = Earnings per share ROA = Return on assets ROE = Return on equity Part 1 Financial Planning, Performance and Control Section B Performance Management Section B.3 Performance measures e*. ROI = Income of business unit / Assets of business unit g. Residual Income (RI) = Income of business unit – (Assets of business unit x required rate of return) Note: “Income” means operating income unless otherwise noted Part 2 Financial Decision Making Section A Financial Statement Analysis

Section A.1 Basic Financial Statement Analysis a. Common size statement = line items on income statement and statement of cash flows presented as a percent of sales; line items on balance sheet presented as a percent of total assets Common base year statements = (new line item amount /base year line item amount) x 100 Annual growth rate of line items = (new line item amount / old line item amount) – 1

b. c.


Letter references refer to subtopics in Learning Outcome Statements

Revised 10/06/10

Section A.2 Financial Performance Metrics – Financial Ratios Unless otherwise indicated, end of year data is used for balance sheet items; full year data is used for income statement and statement of cash flow items. Liquidity a. Net working capital = current assets – current liabilities

b(1) Current ratio = current assets / current liabilities b(2) Quick ratio or acid test ratio = (cash + marketable securities + accounts receivable) / current liabilities b(3) Cash ratio = (cash + marketable securities) / current liabilities b(4) Cash flow ratio = operating cash flow / current liabilities b(5) Net working capital ratio = net working capital / total assets Leverage g(1) Degree of financial leverage = % change in net income / % change in EBIT, or = EBIT / EBT g(2) Degree of operating leverage = %...

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