17318817 Financial Ratio Analysis Formulas1

7/31/2019 17318817 Financial Ratio Analysis Formulas1

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Ratio Analysis Formula

Liquidity Ratios

Profitability Ratios

Ratio Formula Location Explanation

Current Ratio Current Asset

Current Liabilities

B.S. Asset portion

B.S. Liabilityportion

To indicate the ability to meetcurrently maturing obligations

Quick Test Quick Asset

Current Liabilities

B.S. Asset portion

B.S. Liabilityportion

To indicate instant debt paying ability

Inventory to NetWorking Capital

Inventory

(Current Assets Current Liabilities)

B.S. Asset portion

B.S. Liability &Asset portion

To indicate the cushion of excesscurrent assets over current liabilitiesmay be threatened by unfavorablechanges in inventory

Cash Ratio Cash + CashEquivalents

Current Liabilities

B.S. Cur. Asset

B.S. Liability

portion

To indicate how many currentobligations can be met with cash orcash equivalents
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Activity Ratios


Inventory Turnover Net Sales

Inventory

Income Statement

Balance sheet

To assess the efficiency in themanagement of Inventory

Days Of Inventory (days) Inventory

COGS/365

Balance sheet

Income Statement

To assess the efficiency in themanagement of Inventory

Net Working CapitalTurnover

Net Sales

Net Working Capital

Income Statement

Balance sheet (CA-CL)

To assess the effectively theNet Working Capital is used

to generate sales

Asset Turnover Sales

Total Assets

Income Statement

Balance sheet

To assess the amount of salesgenerated by each asset dollar


Net Profit Margin (%) Net profit After Taxes

Net Sales

Income Statement

Income Statement

Indicates the revenue required to

earn a dollar profit after tax

Gross Profit Margin(%)

Sales Cost of Goods Sold

Net Sales

Income Statement

Income Statement

Indicates the profit available fornon-manufacturing overhead

Return On Investment(%)

Net Profit After taxes

Total Assets

Income Statement

Balance sheet

Indicates the efficiency thatmanagement uses the companiesassets

Earnings per Share($)

(Net Profit After Tax Preferred stock Dividends)

Average # Of CommonShares

(IncomeStatement-B.S)

B.S. (sometimes)

Indicates the after tax earningsfor the common stockshareholders


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Fixed Asset Turnover Sales

Fixed Assets

Income Statement

Balance sheet

To assess the amount of salesgenerated by each fixed assetdollar

Average Collection Period

(days)

Accounts Receivable

Sales for Year/365

Balance Sheet

Income Statement

To assess the efficiency in the

management/collection ofAccounts receivable

Accounts ReceivableTurnover

Annual Credit Sales

Accounts Receivable

Work sheet &/or Sub.Ledgers

Balance Sheet

To assess the efficiency in themanagement/collection ofAccounts receivable

Accounts Payable Period Accounts Payable

Purchases for year/365

Balance Sheet

Work sheet

To assess the efficiency in themanagement/payment of A/P


Debt to Asset Ratio (%0 Total Debt

Total assets

Balance Sheet

Balance Sheet

Assess the amount of borrowedfunds used to finance companyassets

Debt to Equity Ratio (%) Total Debt

Shareholders Equity

Balance Sheet

Balance Sheet

Assess the funds provided bycreditors versus the funds by owners

Long Term Debt toCapital Structure (%)

L T debt

Shareholders Equity

Balance Sheet

Balance Sheet

Assess the long-term component ofthe capital structure

Time Interest Earned(dec.)

Profit pre tax + InterestCharges

Interest Charges

Income Statement

Income Statement

Indicates the ability of the companyto meet its annual interest

Coverage of FixedCharges (dec.)

Profit pre tax + InterestCharges +LeaseCharges

Interest Charges +LeaseCharges

Income Statement

Income Statement

Assess the companys ability tomeet all of its fixed expenses

Current Liabilities to

equity (%)

Current Liability

Shareholders Equity

Balance Sheet

Balance Sheet

Assess the short-term financing

portion versus that provided byowners


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Leverage Ratios

Other Ratios

Prepared By

P.Suthaharan


Price/Earnings Ratio

(Dec.)

Market price per Share

Earnings per share

Stock Market Reports

Income Statement

Assess the amount investorsare willing to pay for eachdollar of earnings

Dividend Payout Ratio

(%)

Annual dividends per Share

Annual Earnings per Share

Income Statement

Income Statement

Indicates the percentage ofprofit that is paid out asdividends

Dividend Yield onCommon Stock

(%)

Annual dividends per Share

Current Market price pershare

Income Statement

Stock Market

Indicates the dividend rate ofreturn to common shareholdersat the current market price

Documents

17318817 Financial Ratio Analysis Formulas1