Financial Ratios

Question 1

Current ratio

Answer 1

Current assets / current liabilities

Question 2

Quick ratio

Answer 2

(Current assets - inventories) / current liabilities

Question 3

Working Capital

Answer 3

Current assets - current liabilties

Question 4

Inventory Turnover

Answer 4

Cost of goods sold / average inventory

Question 5

Days to Sell Inventory

Answer 5

365 / Inventory Turnover

Question 6

Accounts Receivable Turnover

Answer 6

Sales (or credit) / Average accounts receivable

Question 7

Receivable collection period

Answer 7

365/Accounts Rec. Turnover

Question 8

Gross Profit Margin

Answer 8

Gross Profit / Sales

Question 9

Operating Profit Margin

Answer 9

Operating Income / Revenue

Question 10

Return on Assets

Answer 10

Earnings after Tax / Assets

Question 11

Return on Equity

Answer 11

Earnings after Tax / Equity

Question 12

Debt to Equity

Answer 12

Long-term debt / Equity

Question 13

Times Interest Earned

Answer 13

EBIT / Interest Expense

Question 14

Debt Ratio

Answer 14

Total Debt / Total Assets

Question 15

Front-End Ratio

Answer 15

PITI / Gross Income

Question 16

Back-End Ratio

Answer 16

PITI + Other Debt / Gross Income

Question 17

DTI or debt-to-income ratio

Answer 17

non-housing consumer debt over net income should be no more than 20%