Liquidity, Solvency, and Profitability Ratios

Current Ratio

Current Assets / Current Liabilities

Accounts Receivable Turnover

Net credit sales / Average net accounts receivable

Average Collection Period

365 days / accounts receivable turnover

inventory turnover

cost of goods sold / average inventory

days in inventory

365 days / inventory turnover

debt to assets ratio

total liabilities / total assets

times interest earned

net income + interest expense + income tax expense / interest expense

free cash flows

net cash provided by operating activities - capital expenditures - cash dividends

return on common stockholders’ equity

net income - preferred dividends / average common stockholders’ equity

return on assets

net income / average total assets

profit margin

net income / net sales

asset turnover

net sales / average total assets

gross profit rate

gross profit / net sales

earnings per share

net income - preferred dividends / weighted average common shares outstanding

price earnings ratio

market price per share / earnings per share

payout ratio

cash dividends paid on common stock / net income