Financial Ratios

Return on Asset (ROA)

A profitability indicator that measures how effectively a business uses its assets to earn profit. Net Profit / Average total assets x 100, % , increase-decrease

Return on investment (ROI)

A profitability indicator that measures how effectively a business uses its capital to earn profit. Net profit/ Average capital x 100, %, increase-decrease

Net Profit Margin (NPM)

A profitability indicator that measures the percentage of sales revenue that is retained as Net Profit. Net Profit / Net Sales x 100, %, increase-decrease

Gross Profit Margin (GPM)

A profitability indicator that measures the percentage of sales revenue that is retained as Net Profit. Net Profit / Gross Profit x 100, %, increase-decrease

Working Capital Ratio (WCR)

A liquidity ratio that measures the ratio of current assets to current liabilities the ability to pay back short term debts as they fall due. Current assets / current liabilities, ratio, increase/decrease

Quick asset ratio (QAR)

A liquidity indicator that measures the ratio of quick current assets to current liabilities to assess the ability to pay back short term debts as they fall due. Current asset - (inventory + prepayments) / current liabilties. Ratio, increase/decrease

Cash Flow Cover (CFC)

A liquidity indicator that measures the how many times cash generated from operating activities can cover short term debts as they fall due. NCF from operations / Average current liabilities. Times per period, faster/slower

Debt Ratio (DR)

A stability indicator that measures how much of the business’ assets are financed by external funds or liabilities. Total liabilities / total assets %, increase-decrease

Asset Turnover (ATO)

An efficiency indicator to indicate how effectively a business uses its assets to earn revenue. Net Sales / Average total assets. Times per period, faster slower

Inventory Turnover (ITO)

An efficiency indicator to indicate how many days on average it takes for a business to convert inventory into sales. Average inventory / COGS x 365, days, faster/slower

Accounts Recievable Turnover (ARTO)

An efficiency indicator to indicate how many days on average it takes for the business to collect cash from Accounts Recievable. Average AR / Net credit sales (plus GST) x 365. Days, faster/slower.

Accounts Payable Turnover (ATO)

An efficiency indicator that indicates on average how many days it takes the business to settle their Accounts Payable. Avg AP / Credit purchases (plus. GST) x 365, days, faster/slower