Ratio Formulas Flashcards
Profitability Ratio
Measures firm’s effectiveness in generating profit from operations
Gross Margin Operating Margin Return on Assets Return on Equity Dividend Payout Ratio
Gross Margin
Gross Profit / Net Sales
% of each sale after payment of goods sold
Operating profit Margin
Operating profit (EBIT) / Net Sales
Profit Margin
Net Income After Interest and Taxes / Net Sales
Return on Assets
Net Income after Interest and Taxes / Average Total Assets
% return on Assets
Return on Equity
Net income after taxes / Average common stockholders equity
% of return to shareholders
Rate of Return on Assets
(Net Income + Interest Expense) / Average total assets
Asset Utilization Ratios (Activity Ratios)
1) Measures time it takes to convert to cash
2) Measures efficiency Management of Assets
Turnover Ratios & number of days sales in inventory
Receivables Turnover
Net Credit Sales / Average A/R
Management efficiency of A/R
Inventory turnover
COGS / Average Inventory
Efficiently utilizing inventory
Number of days sales in Inventory
Average Inventory / (COGS/365)
Average collection period
Average A/R / Average Sales per day
Average Days to collect Receivables
Liquidity Ratio
Measures firm’s ability to meet short term obligations
Current Ratio
Quick Ratio
Current Ratio
Current Assets / Current Liabilities
Quick Ratio
Current Assets - Inventory / CL
