Financial Ratios Flashcards
How do you calculate the Current Ratio?
Current Assets divided by Current Liabilities
Industry average= 2:1
What are the two official names for the Liquidity ratio?
- Working Capital Ratio
- Current Ratio
How do you calculate the Gearing Ratio?
Total Liabilities divided by Total Equity
What is the official name for the Gearing Ratio?
Debt-to-Equity ratio
What ratios are associated with the efficiency financial objective?
- Expense Ratio
- Accounts Receivable Turnover Ratio
How do you calculate the Expense Ratio?
Total expenses divided by Sales times by 100% and then expressed as a percentage
How do you calculate the Accounts Receivable Turnover Ratio?
Sales divided by Accounts Receivable
What ratios are associated with the profitability financial objective?
- Gross profit ratio
- Net profit ratio
- Return on owner’s equity ratio
How do you calculate the Gross Profit ratio?
Gross Profit divided by Sales times by 100% and then expressed as a percentage
How do you calculate the Net Profit ratio?
Net profit divided by Sales times by 100% and then expressed as a percentage
How do you calculate the Return on owner’s equity ratio?
Net profit divided by Total equity times by 100% and then expressed as a percentage
What ratios are expressed as a percentage?
- Expense ratio
- Gross profit ratio
- Net profit ratio
- Return on owner’s equity ratio
