Activity ratios
Receivables turnover
Turnover : The number of times an
asset (such as cash, inventory, raw
materials) is replaced or revolves
during an accounting period.
Days of sales outstanding
/average collection period
Inventory turnover
Days of inventory on hand/
No. of days of inventory
Payables turnover
Number of days of payables
Total assets turnover
Fixed asset turnover
Working capital turnover
Formula
annual sales /average receivables close to the industry norm

365 / receivables turnover close to the industry norm

COGS / avergae inventory close to the industry norm

365 / inventory turnover close to the industry norm

purchases = ending inventory- beginning inv +
Purchases /average trade payables COGS
365 / payables turnover
Revenue / average total assets
Revenue / average fixed assets
Revenue / Average working capital working capital = Current assets - current liabilities
 Liquidity ratios
Current ratio
Quick ratio
Liquidity : Cash ratio
Firm's ability to pay its short
term liabilities Defensive interval
Cash conversion cycle
Formula
Current assets / Current liabilities
Cash + Marketable securities + Receivables /CL
Cash + Marketable securities /CL
Cash+ MS +Rec. / Avg daily expenditures
Days of sales outstanding + Days of inventory on hand - no. of days payables
Comments
Best known measure CR <1 : WC < 0
inventories and other assets (not liquid) not included

expenditures = COGS + SG &A+ R&D

 Solvency ratios

Debt to equity
solvency : Firm's financial leverage Debt to capital
and ability to meet its long term Debt to assets
obligations Financial leverage
ability to repay
interest coverage
fixed charge coverage
Formula Comments
debt = long term debt + interest
Total debt / total equity bearing short term debt
total debt/ total debt + total equity
total debt / total assets
Average total assets / Avg total equity

EBIT + Lease payments / interest payments + lease payments

EBIT / Interest payments
1)
2)

Column1

plus/-

-
Profitability
Net profit margin
Gross profit margin
Operating profit margin
Pretax margin
ROA
Operating return on assets
ROTC
ROE
Return on common equity

Column3
Gross profit =
Operating profits =
Net income =
Total capital =
Total capital =
Column2
Net sales
COGS
Gross profit
Operating expenses
Operating profit (EBIT)
Interest
Earnings before taxes (EBT)
Taxes
Earnings after taxes (EAT)
below the line items adjusted for tax
Net income
Preferred dividends
Income available to common
Formula
Net income / revenue
gross profit / revenue
operating income/revenue or EBIT /revenue
EBT / revenue
Net income / average total assets
operating income/ avg. total assets or EBIT /avg. total assets
EBIT / average total capital
Net income / average total equity
Net income - preferred dividends /avg common equity

Column4
Net sales - COGS
EBIT
EAT before dividends
Long term debt + short term debt + common + preferred equity
Total assets
Comments
Net income form continuing operations

operating profit = EBIT

Net income+ interest expense (1-tax rate) /avg total assets

Column1 Column2