Investment Analysis Ratios - Flashcard set - Mathematical Finance

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Sharpe Ratio

The Sharpe Ratio is given by

\frac{R_p - R_f}{\sigma_p}

where

R_p

is the return of the portfolio,

R_f

is the risk-free rate, and

\sigma_p

is the standard deviation of the portfolio's excess return.

Sortino Ratio

The Sortino Ratio is calculated by

\frac{R_p - R_f}{\sigma_d}

where

R_p

is the return of the portfolio,

R_f

is the risk-free rate, and

\sigma_d

is the standard deviation of the portfolio's downside.

Treynor Ratio

The Treynor Ratio is given by

\frac{R_p - R_f}{\beta_p}

where

R_p

is the portfolio return,

R_f

is the risk-free rate, and

\beta_p

is the beta of the portfolio.

Alpha

Alpha ( $\alpha$ ) is calculated as

\alpha = R_p - (R_f + \beta_p(R_m - R_f))

where

R_p

is the portfolio return,

R_m

is the market return, and

\beta_p

is the portfolio's beta.

Beta

Beta ( $\beta$ ) is computed as

\beta = \frac{Cov(R_p, R_m)}{Var(R_m)}

where

Cov(R_p, R_m)

is the covariance between the portfolio return and the market return, and

Var(R_m)

is the variance of the market return.

P/E Ratio

The P/E Ratio (Price-Earnings Ratio) is given by

\frac{\text{Stock Price}}{\text{Earnings per Share (EPS)}}

.

PEG Ratio

The PEG Ratio (Price/Earnings to Growth Ratio) is calculated by

\frac{\text{P/E Ratio}}{\text{Earnings Growth Rate}}

.

Dividend Yield

Dividend Yield is given by

\frac{\text{Annual Dividends per Share}}{\text{Price per Share}}

.

Return on Equity (ROE)

Return on Equity is calculated as

\frac{\text{Net Income}}{\text{Shareholder's Equity}}

.

Return on Assets (ROA)

Return on Assets is calculated by

\frac{\text{Net Income}}{\text{Total Assets}}

.

Current Ratio

The Current Ratio is given by

\frac{\text{Current Assets}}{\text{Current Liabilities}}

.

Quick Ratio

The Quick Ratio, or Acid-Test Ratio, is calculated by

\frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}

.

Debt to Equity Ratio

Debt to Equity Ratio is calculated as

\frac{\text{Total Liabilities}}{\text{Total Shareholder's Equity}}

.

Interest Coverage Ratio

The Interest Coverage Ratio is calculated by

\frac{\text{Earnings Before Interest and Taxes (EBIT)}}{\text{Interest Expense}}

.

Inventory Turnover

Inventory Turnover is given by

\frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}

.

Cash Conversion Cycle (CCC)

Cash Conversion Cycle is calculated by

\text{Days Inventory Outstanding} + \text{Days Sales Outstanding} - \text{Days Payables Outstanding}

.

Earnings Per Share (EPS)

Earnings Per Share is calculated as

\frac{\text{Net Income} - \text{Dividends on Preferred Stock}}{\text{Average Outstanding Shares}}

.

Price to Book Ratio (P/B)

Price to Book Ratio is given by

\frac{\text{Market Price per Share}}{\text{Book Value per Share}}

, where Book Value per Share is

\frac{\text{Total Assets} - \text{Total Liabilities}}{\text{Number of Shares Outstanding}}

.

Net Asset Value (NAV)

Net Asset Value is calculated as

\frac{\text{Total Assets} - \text{Total Liabilities}}{\text{Number of Shares Outstanding}}

.

Price to Sales Ratio (P/S)

Price to Sales Ratio is given by

\frac{\text{Market Capitalization}}{\text{Total Sales or Revenues}}

.

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