calculation-reference

CFA Level I Financial Statement Analysis Calculations

Ratio analysis, DuPont decomposition, cash flow metrics, and inventory accounting calculations.

TL;DR

FSA calculations translate financial statements into profitability, liquidity, solvency, efficiency, and cash-flow measures. Ratio definitions and accounting method effects are the key exam traps.

Formula Reference

DuPont ROE

ROE = net margin x asset turnover x financial leverage

Separates profitability, efficiency, and leverage effects.

Debt-to-equity

Debt-to-equity = total debt / total equity

A solvency ratio.

Inventory turnover

Inventory turnover = COGS / average inventory

Higher turnover usually means faster inventory movement.

BA II Plus Keystrokes

Store sales, assets, equity, and net income before ratio chains.
Use x / y for each ratio and multiply DuPont components.
Use average balance sheet values when required.

Worked Example

Net margin = 10 percent, asset turnover = 1.2, leverage = 1.8.
ROE = 0.10 x 1.2 x 1.8 = 21.6 percent.
The result decomposes return into operating and financing drivers.

Common Mistakes

Using ending balances instead of averages.
Mixing income statement period data with point-in-time balance sheet data incorrectly.
Forgetting that LIFO and FIFO change both income statement and balance sheet ratios.

Related Guides

CFA Level I Financial Statement Analysis Formula Sheet - Public formula sheet for ratios, DuPont analysis, cash flow metrics, and inventory effects.
FIFO vs LIFO Impact on Financial Statements - Compare FIFO and LIFO effects on COGS, inventory, gross profit, taxes, and ratios.
BA II Plus: Amortization Schedule Step by Step - Use the BA II Plus amortization worksheet to split loan payments into interest and principal.