Ratios

Current Ratio =

Current assets/current liabilities

Current ratio shows:

the company’s overall short-term financial strength

Quick ratio =

(Current assets - Inventory)/Current liabilities

Quick ratio shows:

the company’s ability to pay short-term debts without relying on selling inventory

Average Collection Period =

Accounts Receivables/Net sales/365

Average collection period shows:

Average number of days customers take to pay their debts

Inventory Turnover =

COGS/Inventory

Inventory Turnover shows:

how many times inventory is sold and restocked (usually per year)

A/R Turnover =

Sales/AR

A/R turnover shows:

how many times per period the company collects their AR

Debt Ratio =

Total Liabilities/Total assets

Debt Ratio shows:

how leveraged the company is and how dependent it is on borrowing

Return on total assets(ROA) =

Earnings available for common shareholders/ total assets

ROA shows:

how efficiently the company used its assets to generate profit

Return on equity (ROE) =

Earnings available for common shareholders/Common stock equity

ROE shows:

how much profit the company generates for its owners(shareholders)