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Ratios and performance metrics

FAR Chapter 9 · Area I · Blueprint I.F

A number on a financial statement means little alone. A ratio compares two numbers so you can judge a company against last year, against its budget, or against a competitor. The Blueprint asks you to calculate ratios and performance metrics and to work out how a transaction changes them. Every question is a formula plus care about what goes on top and what goes underneath. One set of numbers, Kite Co, runs through this whole chapter.

In this chapter

1. The data set and how ratios are built
2. Liquidity ratios
3. Activity ratios
4. Profitability ratios and EBITDA
5. Solvency ratios
6. Market ratios
7. How transactions move ratios, and budget versus actual
8. Cash flow ratios, return on sales and the limits of ratios

This chapter has 8 lessons, 52 practice MCQs with explanations and 11 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Profitability, liquidity and solvency ratios
• EBITDA, price to earnings, dividend payout, asset turnover
• budget versus actual variances

Chapter 8: Special purpose frameworks · Chapter 10: Cash and cash equivalents