CPA FAR Ratios

Gross (profit) margin

(net sales — COGS) / net sales

Profit margin

NI / net sales

Return on sales

EBIT / net sales

Return on assets

NI / avg total assets

Dupont return on assets

(profit margin)(asset turnover)

= (NI / net sales)(net sales / avg total assets)

Return on equity

NI / Avg total equity

Operating cash flow ratio

cash flow from operations / current liabilities

Current ratio

current assets / current liabilities

Quick ratio

• (cash & cash equivalents + short term marketable securities + net receivables) / current liabilities

• (current assets — inventory — prepaid exp) / current liabilities

AR turnover

net sales / avg net AR

Days sales in AR

(Ending net AR / net sales) 365

Inventory turnover

COGS / avg inventory

Days sales in inventory

(EI / COGS) 365

AP turnover

COGS / Avg AP

Days payables outstanding

(ending AP / COGS) 365

Cash conversion cycle

days sales in AR + days sales in inventory — days payables outstanding

Debt to equity ratio

total liabilities / total equity

Total debt ratio

total liabilities / total assets

Equity multiplier

total assets / total equity

Times interest earned

EBIT / interest expense

EBITDA

• EBIT + depreciation + amortization

• NI + interest expense + tax expense + depreciation + amortization

earnings before interest, taxes, depreciation, amortization

Earnings per share

(NI - preferred dividends) / weighted average common shares outstanding

Price to earnings ratio

share price / basic EPS

Dividend payout

cash dividends / NI

Asset turnover

net sales / avg total assets