Financial ratio formulas
Prepared by Pamela Peterson Drake
1.
Operating cycle
Inventory Inventory = Average day's cost of goods sold Cost of goods sold / 365 Accounts receivable Accounts receivable = Average day's sales on credit Sales on credit / 365
Number of days of inventory =
Number of days of receivables =
Number of days of payables =
Accounts payable Accounts payable = Average day's purchases Purchases / 365
Note: Purchases =
Cost of Ending Beginning + + goods sold inventory inventory
Operating cycle =
Number of days Number of days + of inventory of receivables Number of days of inventory + Number of days Number of days − of receivables of purchases
Net operating cycle =
2.
Liquidity
Current assets Current liabilitie s
Current ratio =
Quick ratio =
Current assets - Inventory Current liabilitie s Current assets - Current liabilitie s Sales
Net working capital to sales ratio =
3.
Profitability
Gross income Sales
Operating income Sales
Gross profit margin =
Operating profit margin =
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
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Net profit margin =
Net income Sales
4.
Activity
Cost of goods sold Inventory
Sales on credit Accounts receivable
Inventory turnover =
Accounts receivable turnover =
Total asset turnover =
Sales Total assets Sales Fixed assets
Fixed asset turnover =
5.
Financial leverage
Total debt Total assets Long - term debt Total assets
Total debt to assets ratio =
Long - term debt to assets ratio =
Total debt to equity ratio =
Total debt Total shareholders' equity
Equity multiplier =
Total assets Shareholders' equity
Earnings before interest and taxes Interest
Times - interest - coverage ratio =
Fixed - charge coverage ratio =
Earnings before interest and taxes + Lease payment Interest + Lease payment
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
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6.
Shareholder ratios
Net income available to shareholders Number of shares outstanding Dividends paid to shareholders Number of shares outstanding Dividends Earnings
Earnings per share =
Dividends per share =
Dividend payout ratio =
Price-earnings ratio =
Market price per share Earnings per share
7.
Return ratios
Operating income Total assets
Basic earning power ratio = Operating return on assets = Net income Total assets
Return on assets =
Return on equity =
Net income Shareholders' equity
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
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