16 terms

Financial Ratios

Current Ratio
Current Assets/Current Liabilities, Financial ratio for measuring a company's ability to pay current debts out of current assets.
Quick Ratio
(current assets - inventory) / Current liabilities, a financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).
Cash Ratio
cash/current liabilities, A cash-basis ratio used to evaluate solvency.
Inventory Turnover
COGS / Inventory, the number of times the average inventory has been sold and replaced in a given period of time.
Days Sales in Inventory
365/inventory turnover-measures how many days inventory sits on average before its sold
Receivable turnover
Sales / Average Receivables, how many times, on average, a company turned its receivables into cash during an accounting period
Average Collection Period
365/Receivable turnover, The average amount of time that a receivable is outstanding.
Payable Turnover
(COGS/average Accounts Payable), Accounts payable, is the number of times on average that a company pays its accounts in an accounting period
Average Payable and Trade days
365/Payable turnover) Number of days on average that it takes to pay off accounts
Total Debt Ratio
total Liabilities/total assets, measure of leverage that takes into account all debts of all maturities to all creditors
Debt to Equity
Total Liabilities / Stockholder's Equity, How much debt there per dollar of equity. The proportion of owners contribution to loan contribution.
Times interest earned
EBIT / Interest Expense, The ratio shows the amount of resources generated for each dollar of interest expense. In general, a high ratio is viewed more favorable than a low ratio
Gross Profit Margin
Gross profit / Revenue
Net Profit Margin
Net Profit/Net Sales
Return on total Assets (ROA)
Net Income / Average Total Assets, A measure of the overall effectiveness of management in generating returns to common stockholders with its available assets.
Return on Equity (ROE)
Net Income/Total Equity, measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners.