Financial Ratios

Performance Ratios

How profitable a company is and how efficiently it is being run.

Profitability metrics

Metrics that assess a company's ability to generate profit.

Gross Profit Margin

Gross profit divided by revenue.

Operating Margin

Operating income divided by revenue.

Net Profit Margin

Net income divided by sales.

EBITDA Margin

EBITDA divided by revenue.

Efficiency metrics

Metrics that evaluate how well a company utilizes its assets.

Days A/R

Accounts Receivable divided by total revenue multiplied by the number of days in the period.

Days Inventory

Inventory divided by Cost of Goods Sold multiplied by the number of days in the period.

Days A/P

Accounts Payable divided by Cost of Goods Sold multiplied by the number of days in the period.

Cash Conversion Cycle

The time it takes for a company to convert its investments in inventory and accounts receivable into cash flows from sales.

Financial Ratios

Metrics that assess liquidity, capital structure, and a company's ability to service annual debt obligations.

Liquidity

A company's ability to cover its current liabilities using only its current assets.

Current Ratio

Current Assets divided by Current Liabilities.

Quick Ratio

Current Assets minus Inventory divided by Current Liabilities.

Cash Ratio

Cash and Cash Equivalents divided by Current Liabilities.

Leverage (Solvency)

The makeup of a company's funding sources, indicating the proportion of debt to equity.

Debt to Equity

Total Debt divided by Shareholder's Equity.

Debt Ratio

Total Liabilities divided by Total Assets.

Debt to Tangible Net Worth

Liabilities (or Funded Debt) divided by [Equity - Intangible Assets].

Coverage

How easily a company can cover its annual interest obligations using its annual operating cash flow.

Times Interest Earned OR Interest Coverage

EBIT divided by Interest.

Debt Service Coverage

EBITDA divided by [Annual Principal + Interest Payments].

Fixed Charge Coverage

[EBITDA + Fixed Charges] divided by [Fixed Charges + Principal + Interest Payments].

Loan-to-Value

Loan Amount divided by Appraised Value.