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Stocks 305: Quantifying Competitive Advantages

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1.
What does a company's turnover ratio measure?
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How efficiently the company uses its assets to generate sales.
2.
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.
3.
Which of the following is an example of a non-interest-bearing current liability?
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Accounts payable. Accounts payable are the most common non-interest-bearing liability. Short-term debt bears interest, while accounts receivable is an asset.
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.
When using net profit margin to look at the relative efficiency of companies, it is best to use it _______.
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Within the same industry. It is best to use both net profit margin and turnover in isolation only if looking at very similar companies.