Ratio equations Flashcards
Equity Multiplier
Total assets/Total equity
debt to equity ratio
total debt/ total equity
total debt ratio
(total assets - total equity)/ total assets
Cash ratio
cash/ current liabilities
Measures short-term debt paying ability
quick ratio
(Current assets-inventory)/ current liabilities
Current ratio
Current assets/ current liabilities
ability to pay short term debts
price-earnings ratio
Market price per share/ basic earnings per share
basic earnings per share
profit available to common shareholders/ weighted ave # of common shares
not very useful, you need to divide it by something else to be comparable
market to book ratio
market value per share/ book value per share
Return on Equity (RoE)
Net income/ total equity
Return on assets (RoA)
net income/ total assets
for every dollar in assets they get $x in income
Profit margin
net income/ sales
total asset turnover
sales/ total assets
higher is better: it indicates that for every dollar invested in assets, more net income is being generated
receivable turnover
Net credit sales/ average accounts receivable
(from this year and previous year)
Measures liquidity of receivables
Inventory turnover
COGS/inventory
