Professional Documents
Culture Documents
Financial Statement
Ratios
Q&A
FORMULAS
Gross Margin
Gross Margin
Sales
Measure of profitability
Price-Earnings Ratio
Market Price per Share
Earnings per Share
An index of whether a stock is
relatively cheap or relatively
expensive in relation to current
earnings.
Working Capital
Current Assets Current
Liabilities
Measures the companys ability to
repay current liabilities using only
current assets.
Current Ratio
Current Assets Current
Liabilities
Test of short term debt-paying ability.
Acid-Test Ratio
Cash + Marketable Securities + Accounts Receivable +
Short term Notes Receivable
____________________________________________________________
Current Liabilities
Inventory Turnover
Cost of Goods Sold
Avg. Inventory balance
Measures how many times a
companys inventory has been sold
during the year.
Return on Sales
Net Income
Net Sales
Also called net profit rate, net profit
margin; measures profit percentage
per peso sales
Net Income
Payable Turnover
Net Credit Purchases
Avg. Trade Payables
Measures the effectiveness of using
trade credit facility from suppliers.
Payable Days
.
360
Payable Turnover
Indicates the number of days spent
before paying liabilities to
merchandise suppliers.
Materials Turnover
Materials Used
Avg. materials inventory
Indicates the # of times the
materials were used on the average
during the period.
WIP Turnover
Cost of Goods
manufactured
Avg. WIP inventory
Indicates the number of times avg.
WIP inventories is converted to
finished goods.
Cash Turnover
Cash Operating
expenses
Avg. Cash Balance
Measures the ability of the business
to meet operating expenses
payments given a particular cash
balance.
360
Cash Turnover
Indicates the # of days spent before
meeting operating expense
payments.
Assets Turnover
Net Sales
Avg. Total Assets
Measures the effectiveness of asset
utilization.
excluding
Depn. & Amort.
Defensive-Interval Ratio
Defensive Assets
Avg. Daily Expenditures
Measures the number of day
defensive assets are available to
meet daily cash expenses. Defensive
assets include cash, marketable
securities and trade receivables.
Operating Leverage
Contribution Margin
EBIT
Measures the number of times profit
will increase or decrease in relation
to change net sales.
Degree of operating leverage
Operating Turnover
Collection Period +
Inventory Days
Collection period = Avg. Collection
period
Inventory Days = Avg. Sale Period
Measures the speed of the business
cycle; the # of days cash was
invested in the normal business
operations until it was recovered
Debt-to-Assets Ratio
Total debt
Total Asset
Measures the relative share of
creditors over the total resources of
the firm.
Equity-to-Assets Ratio
Net Stockholders Equity
Total Assets
Equity Ratio
Measures the amount of resources
provided by the owners of the firm.
Equity Multiplier
Total Assets (Equity)
Net Stockholders Equity
Financial Leverage
.
EBIT
Total Leverage
Degree of operating leverage
x
Degree of financial leverage
Total Assets
Total Liabilities
A rough estimate of the firms ability
to meet interest payments to
creditors.
Non-Current Assets
Long-Term Liabilities
Shows the capability to meet noncurrent liabilities using non-current
resources.
Dividends
Cash from Operations
Reinvestment
Purchase of Assets
Cash from Operations
Depreciation-Amortization Impact
Depreciation + Amortization
Cash from Operations
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