2. Formulas for Financial Statement Analysis

Includes formula related to liquidity, solvency, profitability and market prospects.

Working capital

Current assets - Current liabilities

Current ratio

Current assets / Current liabilities

Quick ratio / acid-test ratio

(Cash + short term investments + net current receivables) / Current liabilities

Accounts receivable turnover

Net sales / Average accounts receivable, net

Inventory turnover

Cost of goods sold / Average inventory

Days' sales uncollected

(Accounts receivable, net / Net sales) x 365

Days' sales in inventory

(Ending inventory / Cost of goods sold) x 365

Total asset turnover

Net sales / Average total assets

Debt ratio

Total liabilities / total assets

Equity ratio

Total equity / Total assets

Debt to equity ratio

Total liabilities / Shareholders' equity

Times interest earned ratio

(Net income + Interest expense + income tax expense) / Interest expense

Profit margin ratio

Net income / Net sales

Gross margin ratio

(Net sales - cost of goods sold) / Net sales

Return on total assets

Net income / Average total assets

Return on common stockholders' equity

(Net income - Preferred dividends) / Average common stockholders' equity

Book value per common share

Shareholders' equity applicable to common shares / Number of common shares outstanding

Basic earnings per share

(Net income - preferred dividends) / Weighted-average common shares outstanding

Price-earnings ratio

Market price per common share / Earnings per share

Dividend yield

Annual cash dividends per share / Market price per share