Ratios in deep

Question 1

What are the performance Ratios

Answer 1

There are 7 performance ratios

1) Gross profit ratio

Gross profit / Sales =%

2) Operating Margin

EBIT / Sales =%

EBITDA / Sales =%

3) Net profit margin

Net income/sales =%

4) Return on assets (ROA)

Net income / Total assets =%

5) Return on equity (ROE)

Net income / equity =%

6) EPS and diluted EPS

is given

7) Price to earning ratio

Share price / earnings per share = multiple

Question 2

What are the Activity Ratio (management ratio)

Answer 2

1) Days Inventory outstanding (DIO)

( Inventory / cost of sales ) * 365

2) Days payable outstanding (DPO)

(Account payable / Purchases) * 365

3) Days sale oustanding (DSO)

(Account receivables / Revenue) * 365

4) Account payable turnover

purchases / accounts payable

5) Inventory turnover

Cost of sales / inventory

6) Accounts receivable turnover

revenue / account receivable

7) Cash cycle

DIO+DSO-DPO = in days

8) Asset turnover

Sales / total assets

Question 3

What are the liquidity Ratios

Answer 3

1) Current ratio

Current assets / Current liabilities

2) Quick ratio

( Cash and cash equivalents+ current investments + account receivable) / Current liabilities

3) Cash ratio

( Cash and cash equivalents + current investments) / current liabilities

Question 4

Financing Ratio

Answer 4

Debt ratios

1) Debt ratio

Total liabilities / total assets =%

Total interest bearing liabilities/ total assets = %

2) Long terme to equity ratio

Long term debt / equity