Financial Ratios
at a Glance
Cheat Sheets
Financial Ratios at a Glance
ACTIVITY RATIOS
Meaning
Annual sales The efficiency of a company in collecting its
Receivables turnover = trade receivables
Average receivables
365 The average number of days a company takes
Days of sales outstanding = to collect its receivables from clients
Receivables turnover
Cost of goods sold The efficiency of a company in terms of
Inventory turnover = inventory management
Average inventory
365
Days of inventory on hand = The average inventory processing period
Inventory turnover
Purchases The efficiency of a company in allowing trade
Payables turnover = credit to suppliers
Average trade payables
365 The average number of days a company takes
Number of days of payables = to pay its suppliers
Payables turnover ratio
Revenue The efficiency of a firm in utilizing its fixed
Fixed assets turnover =
Average net fixed assets assets
Revenue The efficiency of a firm in managing its
Working capital turnover = working capital (current assets - current
Average working capital
liabilities)
Revenue The efficiency of a firm in using its total assets
Total assets turnover = to create revenue
Average total assets
Days of sales outstanding The number of days a company takes to
Cash conversion cycle = + Days of inventory on hand convert its investments in inventory and other
- Number of days of payables resources into cash flows from sales
Revenue The efficiency of a firm in utilizing equity to
Equity turnover = create revenue
Average total equity
Financial Ratios at a Glance
LIQUIDITY RATIOS
Meaning
Current assets Ability to meet current liabilities
Current ratio = (with total current assets)
Current liabilities
Cash + Marketable securities + Receivables Ability to meet current liabilities
Quick ratio =
Current liabilities (with total current assets, excluding inventory)
Cash + Marketable securities Ability to meet current liabilities
Cash ratio = (with cash and marketable securities only)
Current liabilities
Defensive Cash + Marketable securities + Receivables The number of days a company can cover its
interval = Average daily expenditure
average daily expenses with the use of current
liquid assets only
Financial Ratios at a Glance
SOLVENCY RATIOS
Meaning
Total debt
Debt-to-equity = Debt as a percentage of total equity
Total shareholder’s equity
Total debt
Debt-to-capital = Debt as a percentage of total capital
Total debt + Total shareholder’s equity
Total debt
Debt-to-assets = Debt as a percentage of total assets
Total assets
Average total assets An indicator of a company’s debt financing
Financial leverage = usage
Average total equity
Earnings before interest and taxes
Interest coverage = The ability to cover interest expenses
Interest payments
Fixed charge Earnings before interest and taxes + Lease payments
The ability to cover interest and lease expenses
coverage = Interest payments + Lease payments
Financial Ratios at a Glance
PROFITABILITY RATIOS
Meaning
Gross profit Gross profitability as a percentage of total revenue
Gross profit margin =
Revenue
Operating income (EBIT) Operating profitability (before interest and tax) as a
Operating profit margin = percentage of total revenue
Revenue
EBT Operating profitability (before tax) as a percentage
Pre-tax margin = Revenue of total revenue
Net income
Net profit margin = Net profitability as a percentage of total revenue
Revenue
Net income Net profitability (excluding interest and taxes) as a
Return on assets (ROA) =
Average total assets percentage of total invested funds
Operating profit (EBIT) Net profitability (including interest and taxes) as a
Operating return on assets (ROA) =
Average total assets percentage of total invested funds
Operating profit (EBIT) Operating profitability as a percentage of total
Return on total capital =
Average total capital capital
Net income Net profitability as a percentage of total equity
Return on Equity (RoE) =
Average equity
Financial Ratios at a Glance
VALUATION RATIOS
Meaning
Net Income - Preferred dividends
Earnings per Share (EPS) = Income earned per 1 common share outstanding
Outstanding number of
common shares
Share price The price that investors are willing to pay per $1 of
Price earnings (P/E) ratio = earnings
Earnings per share (EPS)
Market capitalization Total price that investors are willing to pay for a
P/E ratio (company wide) = company's Net income
Net income
Dividend per share The "portion "of a share price that is distributed as
Dividend yield =
Current share price dividends
Net income - Dividends declared The "portion" of Net income that is reinvested in
Retention rate (RR) = the company
Net income
Dividends declared The "portion" of Net income that is distributed as
Dividend payout =
Net income dividends
Sustainable growth rate (g) = RR x ROE Equity growth rate
Financial Ratios at a Glance
DUPONT ANALYSIS
Return on Equity
(RoE)
Net income
Average equity
Net profit Equity
margin turnover
Net income X Revenue
Revenue Average equity
Net profit Asset Financial
margin turnover leverage ratio
Net income X Revenue X Average assets
Revenue Average assets Average equity
Interest Operating Asset Financial
Tax burden
burden profit margin turnover leverage ratio
Net income X EBT X EBIT X Revenue X Average assets
EBT EBIT Revenue Average assets Average equity
