Accounting Ratios

Gross Profit

Net Sales- COGS

Receivable Turnover Ratio/RTR

a measure that shows how many times average trade receivables are recorded and collected during there period
higher: faster receivable collection
lower: slower receivable collection

What is the equation for the receivable turnover ratio?

Net Sales/ Average Net Trade accounts Receivable

Inventory Turnover Ratio/ITR

represents the amount of time it takes for goods to be produced and sold
high: goods are produced efficiently
low: goods are inefficiently produced and take a long time to be sold

COGS/Average Inventory

True or False: Account Payable Turnover is COGS/ Accounts Payable

FALSE

Account Payable Turnover/APT

\-Represents how quickly a company is paying their trade payables higher: paying in timely manner lower: paying in untimely manner

\-higher: paying in timely manner lower: paying in untimely manner

COGS/ Average Accounts Payable

Gross Profit Margin

(Net Sales- COGS)/ Sales Revenue

Net Profit Margin

-represents the percentage of sales a company has turned into profits: the higher, the better
Net Income/ Sales Revenue

Total Asset Turnover/TAT

Sales Revenues/ Average Total Assets

Fixed Asset Turnover/FATR

Net Sales/ Average Net Fixed Asset

Times Interest Earned

\-measures a company’s ability to service interest obligations based on its current operating income

(Net Income+Net Income Expense+Tax Expense)/Interest Expense

Profitability Ratios (5)

**The primary measures of a company’s success: focus on n**==**e**==**t income and how it compares to other amounts on the income statement**

\-ROA

\-ROE

\-Gross Profit %

\-Net Profit Margin

\-Quality of Income

ROE

NI/Avg.SE

ROA

NI/Avg.TA

Gross Profit %

Gross Profit/ Net Sales Revenue

Net Profit Margin

Net Income/ Net Sales

EPS

Net Income/Weighted Average Number of Shares Outstanding

Quality of Income

Cash Flows from Operating Activities /Net Income

Asset Turnover Ratios (4)

Focus on how efficiently a company uses its assets

\-TATR

\-FATR

\-RTR

\-ITR:

TATR

Net Sales Revenue/ Average Total Assets

FATR

Net Sales Revenue/ Average Net Fixed Assets

RTR

Net Credit Sales/Average Net Receivables

ITR

COGS/ Average Inventory

Liquidity Ratios (3)

\-Current Ratio

\-Quick Ratio

\-Cash Ratio

Current Ratio

Current Assets/ Current Liabilities

Cash Ratio

Cash & Cash Equivalents/ Current Liabilities

Solvency Ratios

Ratios that measure a company’s ability to meet its long term debt **obligations**

\-When company’s aren’t able to meet debt obligations and have to shut down, they’re considered dissolved

\-TIE

\-CCR

\-DTE

TIE

(NI+IE+ITE)/Interest Expense

Cash Coverage Ratio

\-Measures the ability of a company to cover their interest expenses

Cash Flows From Operating Activites/ Interest Paid

Debt To Equity

TL/ TSE

Market Ratios (2)

\-Ratios that have to do with the stock **market**

\-P/E

\-Dividends Yield Ratio

P/E

Price of Share/ EPS