6.0 ratios and performance indicators Flashcards
Management should use the Acid-Test because : ?
To test the short-term liquidity
Return on Assets (ROA) Formula
= Net income / average assets
Asset turnover formula :
= Net Sales /Average assets
Profit Margin formula :
= Net Income /Net sales
Current Ratio formula:
= Current assets/ current liabilities
Inventory turnover ratio:
= COGS/average inventory
Times interest earned formula:
= Income before interest expense & taxes / Interest expense
Accounts receivable turnover :
= Net Credit sales/ Average accounts receivable
Dividend payout ratio:
= Cash dividends/Net Income
A/R turnover in days:
360 or 365 / A/R turnover ratio
Dividends per share payout ratio:
=Dividends per share/Earnings per share
Earnings per share:
= Net income -Preferred dividends / Weighted -average common shares outstanding
Days sales outstanding (DSO) :
=Accounts receivable/ ( Sales on credit /365)
Debt to equity ratio:
=Total debt/ total equity
Return on assets :
= Net income/Average total assets
Gross margin :
= Gross Profit/ sales
Price earnings ratio:
= Market price per share(Share Price)/ earnings per share (EPS)
Quick ratio:
= (Cash+ Cash equivalents+ Marketable securities +net accounts receivable) - Inventory - Prepaids / Current liabilities
Return on Sales formula:
= Earnings before interest and taxes/ Net sales
Accounts payable turnover
=COGS/ average accounts payable
Days sales in receivable :
= 365/ accounts receivable turnover
Inventory turnover :
= COGS/ average inventory
Days payables outstanding:
= 365/ Accounts payable turnover
Days supply in inventory:
= 365 days/ inventory turnover
