Ratio Formulas

Question 1

Formula for Return on Assets (ROA)?

Answer 1

ROA = Profit after tax/ Avg total assets

Question 2

Gross Profit Margin Formula?

Answer 2

GPM = Gross Profit/ sales

Question 3

Operating Profit Margin formula?

Answer 3

OPM = Operating profit/ sales

Question 4

Profit Margin formula?

Answer 4

PM = Profit after tax/ sales

Question 5

Net Asset Turnover Formula?

Answer 5

NAT = Sales or turnover/ avg total assets

Question 6

Return on Capital Employed (ROCE) formula?

Answer 6

ROCE = Operating profit/ Total assets - current liabilities

Question 7

Current Ratio Formula?

Answer 7

Current Ratio = Current Assets/ Current liabilities

Question 8

Acid test/ Quick ratio formula?

Answer 8

Acid test/ quick ratio = Current assets - inventory - prepaid expenses/ current liabilities

Question 9

Inventory Turnover Ratio formula?

Answer 9

Inventory Turnover = Cost of sales/ avg inventory

Question 10

Inventory Holding Period Ratio formula?

Answer 10

IHP = (average inventory/ cost of sales) x 365

Question 11

Accounts Trade Receivable Turnover formula?

Answer 11

= Credit sales/ avg receivables

Question 12

Accounts Receivable collection period formula?

Answer 12

= (Average receivables/ credit sales) x 365

Question 13

Trade payables Payment period formula?

Answer 13

= (Average trade payables/ cost of sales) x 365

Question 14

Debt to equity ratio formula?

Answer 14

= Total Debt (liabilities) / Equity

Question 15

Debt to total assets ratio fomular?

Answer 15

= Total debt (liabilities)/ total assets

Question 16

Interest Coverage Ratio formula?

Answer 16

= Operating profit or “EBIT”/ interest expense