ACCT Ratio Definitions

gross profit percentage

the amount remaining from each dollar of sales after deducting COGS

return on assets

the amount earned for the shareholders from each dollar invested in assets

profit margin (return on sales)

the amount earned for the shareholders from each dollar of sales after subtracting all expenses

asset turnover

the amount of sales generated from each dollar invested in assets

return on common stockholder’s equity

the amount earned for the common shareholders from each dollar of the common shareholders’ investment

working capital

indicates company’s ability to use its current resources to satisfy its current obligations

current ratio

the amount of current assets available to service current liabilities

quick ratio

the amount of liquid assets available to pay short-term liabilities

operating-cash-flow-to-current-liabilities ratio

company’s ability to pay current liabilities from operating cash flows

accounts receivable turnover

number of the sales/collection cycles experienced by a firm during the period

average collection period

number of days required, on average, to collect an outstanding account receivable

inventory turnover

number of production/sales cycles experienced by a firm during the period

days’ sales in inventory

number of days, on average, required to sell inventory currently on hand

debt-to-equity ratio

the amount of debt financing for every dollar of equity financing

times-interest-earned ratio

extent to which current operating income covers debt service charges

operating-cash-flow-to-capital-expenditure ratio

ability of a firm’s operations to provide sufficient cash to replace and expand propterty, plant, and equipment

earnings per share

net income available to common shareholders, calculated per share

price-earnings ratio

a measure of the price of a share of common stock relative to the share’s annual earnings

dividend yield

earnings on an investment in stock coming from dividends

dividend payout ratio

the percentage of net income paid out to shareholders as dividends