The Schweser notecard gives about 25 critical ratios on the condensed note card. How many of these need to be memorized…please don’t tell me all of them?!
you don’t need to memorize, you need to learn how different things affect the ratios. But the ratios themselves you need to remember like inventory turns for example
Learn them all dude. Their all fair game come exam day.
just think about how much more you need to learn for Level II! muwahahahahahaha
-Benjiko- Do you have a finance/accounting background? We used financial ratios extensively in the majority of my finance classes. They are burned into the back of my skull. Just keep learning them and brain dump them once a day on a sheet of paper until you have them down.
Make sure to use AVERAGE numbers in any ratio where the denominator is a BALANCE SHEET item. For example ROE, you usually (if given 2 years of data) average the equity and then do NI/equity. Same for assets, etc… Also any turnover ratios always have an income statement item in the numerator like A/R turnover which is Sales/Accts Receiv or total asset turnover which is Sales/avg assets. or inventory turnover which is COGS (an income statement item) / avg inventory. So think of things that way and you will eventually get it. Writing these things down always helps. Know cash conversion cycle cold.
Agree with AndrewUNH, learning which ones are averaged is really important. A few basic rules: - if the ratio contains the word “turnover” - average the denominator - if the ratio starts with “debt to” (eg debt-to-equity) - don’t average it - if the ratio starts with “return” (eg return on assets) - average the denominator. there are a couple of exceptions eg return on total capital isn’t averaged. But on the whole I still find these rules helpful.