Ratio

Current Ratio

Uses (measures what)

Measures liquidity, higher ratio = greater firm liquidity

Acid-Test (Ratio)

Better liquidity measure than Current, it omits least liquid asset, high
= great liquidity

Average
Collection Period

Number of days for a firm to collect accts receivable: lower # higher liquidity

Accts Receivable
Turnover

Time required for a firm to collect accts receivable: higher # of

turnovers fast collecting time more liquid

Inventory
Turnover

Size of the firms investment in inventory: higher the turnover lower

the firms investment more liquid

Debt Ratio

Measures extent to which the firm ahs uses non-owner financing,

borrowed funds create financial leverage: higher ratio greater
reliance on non-owner financing or financial leverage

Times Interest
Earned Ratio

Firms ability to pay its interest expense from the firms operating
income: High ratio greater ability to pay interest in timely manner

Total Asset
Turnover Ratio

Firms efficient use of its investment in total access: high ratio firm
is more efficiently using its assets to generate sales

Fixed Asset
Turnover Ratio

Firms efficient use of investment in fixed assets (specifically, net

plant and equipment): - high ratio using fixed assets more
efficiently

Gross Profit
Margin
(GPM)

Profitability after considering cost of goods, indicates the firms

markup on its cost of goods sold: high ratio greater profitability
and better control of cost of goods sold expenses

Operating Profit
Margin (OPM)

Profitability after considering both cost of goods and operating

expenses: high ratio greater profitability

Net Profit Margin

(NPM)

Profitability after considering all expenses incurred: high ratio

greater profitability and better control

Operating Return
on Assets
(OROA)

Rate of return earned on total asset investment in the firm that

results from operating income (before interest and taxes): - high
ratio greater return earned from operations

Return on Equity

Rate of return earned on the stockholders equity investment in firm:

high ratio greater the return

Price-Earnings
Ratio

Indicates the valuation of the firms shares relative to earnings: high ratio investors place high dollar vale on each dollar of the
firms earnings

Market-to-book

Indicates the valuation of the firms shares relative to the investment

made by the shareholders in the firm: high ratio investors place
high dollar value on each dollar of investment made

Formula

Current Assets
Current Liabilities
Current AssetsInventory
Current Liabilities
Acconts Receivable
Sales
annual credit /365 days
AccountsCredit Sales
Accoun ts Receivable
Cost of Goods Sold
Inventories
Total Liabilities
Total Assets
Net Operating IncomeEBIT
Interest Expense
Sales
Total Assets
Sales
Net PlantEquipment
Gross Profits
Sales
Net Operating IncomeEBIT
Sales
Net Income
Sales
Net Operating ncomeEBIT
Total Assets
Net Income
Common Equity
Market Price per Share
Earnings per Share
Maket Price per Sahre
Book Value per share