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Stocks 305: Quantifying Competitive Advantages

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1.
Which of the following measures will not affect return on assets (ROA)?
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Asset/equity ratio. The asset/equity ratio will affect return on equity (ROE), not ROA.
2.
You've probably discovered a good cash machine if a company's free cash flow is more than _______ of sales.
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5%. Five percent is generally accepted, though you should investigate the company further.
3.
What does a company's turnover ratio measure?
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How efficiently the company uses its assets to generate sales.
4.
Which expenses are not subtracted from sales when calculating NOPAT (net operating profit, after taxes)?
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Interest. Interest expenses are not subtracted from operating profit when calculating NOPAT. Taxes (the "AT" in NOPAT) obviously are, while COGS are subtracted from sales to get to operating profit.
5.
There are three main types of profit margins used by companies. Which of the following is not one of them?
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Capital margin. This is not one of the margins used.