Financial Ratio

Financial Statement Analysis  A comparison in fraction, proportion, decimal or

Source: http://haveyouplanned.com

percentage of two significant figures taken from

the financial statements

Financial Ratio  Expresses the direct relationship between two or

The DuPont System more quantities in the statement of financial
position and statement of comprehensive
Using Financial Ratios income of a business firm
The Earnings Record

*Property of STI I0040 *Property of STI I0040

1 _________________________ 2 __________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________

Financial Ratio Financial Ratio

Source: http://haveyouplanned.com Source: http://haveyouplanned.com

 Leverage Ratios – shows how heavily the  Profitability Ratios – measures the firm’s return
company is in debt on investment

 Liquidity Ratios – measures how easily the  Market-value Ratios – shows how the firm is
company can lay its hands on cash valued by its investors

 Efficiency or Turnover Ratios – measures how

efficiently a company uses its assets

*Property of STI I0040 *Property of STI I0040

3 _________________________ 4 __________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
 Financial Ratio Financial Ratio

Leverage Ratios Source: http://haveyouplanned.com

Liquidity Ratios Source: http://haveyouplanned.com

Long-term debt + Leases Net Working Capital

Long-term debt ratio = Net Working Capital to assets =
Long-term debt + Leases + Equity Total Assets
Long-term debt + Leases Current Assets
Debt-equity ratio = Current ratio =
Equity Current Liabilities
Total Liabilities Cash + Marketable Securities + Accounts Receivable
Total debt ratio = Quick ratio =
Total Assets Current Liabilities
Earnings before Interest & Taxes (EBIT) Cash + Marketable Securities
Times interest earned ratio = Cash ratio =
Interest Payments Current Liabilities
EBIT + Depreciation Cash + Marketable Securities + Accts Receivable
Cash coverage = Interval measure =
Interest Payments Average daily expenditures from operations

*Property of STI I0040 *Property of STI I0040

5 _________________________ 6 __________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________

Financial Ratio Financial Ratio

Efficiency Ratios Source: http://haveyouplanned.com

Profitability Ratios Source: http://haveyouplanned.com

Sales
Total Asset Turnover = EBIT - tax
Average total assets Net profit margin =
Sales
Sales
Fixed Asset Turnover = EBIT - tax
Average Fixed Assets Return on assets (ROA) =
Average total assets
Sales
NWC turnover = Earnings Available for Common Stock
Average net working capital Return on equity (ROE) =
Average equity
Cost of Goods Sold
Inventory turnover = Dividend per share
Average Inventory Payout ratio =
Average Inventory
Earnings per share
Days' sales in inventories = Plowback ratio = 1 - Payout Ratio
Cost of goods sold/365
Average Receivables Growth in equity from plowback = Plowback Ratio x ROE
Average collection period =
Average Sales

*Property of STI I0040 *Property of STI I0040

7 _________________________ 8 __________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
 Financial Ratio The DuPont System

Market Value Ratios

 A system popularized by a chemical company called
Source: http://haveyouplanned.com

DuPont
Stock Price  Focuses on the links and relationships of some profitability
P/E Ratio =
Earnings per share and efficiency ratios
Dividend per share
Dividend yield = ROA = Asset Turnover x Profit Margin
Stock Price
Stock Price
Market to book = EBIT - Taxes Sales EBIT-Taxes
Book Value per share = x
Assets Assets Sales

*Property of STI I0040 *Property of STI I0040

9 _________________________ 10 _________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________

The DuPont System

Turnover Ratio Profit Margin ROA

Fine Dining 2 10% 20%
Turo-turo 4 5% 20%

Asset Profit
Firm Sales Profits Assets ROA
Turnover Margin
HAS P4,000,000 P800,000 P8,000,000 0.5 20% 10%
RM P1,600,000 P400,000 P4,000,000 0.4 25% 10%
HAS Inc. P4,000,000 P1,200,000 P12,000,000 0.33 30% 10%

*Property of STI I0040

11 ________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________