ACC Ratios

Dupont Model

Return on Equity

Return on Assets

• Profit Margin

  • Operating Margin

  • Gross Profit Margin

  • SG&A expense margin

  • Effective Tax Rate

• Asset Turnover

  • PP&E Turnover

  • Days in Receivables

  • Days in Inventory

  • Days in Payables

Financial Leverage

• Debt Ratios

• Times Interest Earned

Productivity Rations

Asset Turnover

PP&E Turnover

CCC

Profitability Ratios

Profit Margin

Operating Margin

SG&A expense margin

Gross Profit Margin

Return on Equity

Net Income/Equity

How much profit company is making per dollar of shareholder’s equity

HIGHER IS BETTER

Return on Assets

Net Income/Assets

How much profit a company is making for every dollar of its assets

HIGHER IS BETTER

Profit Margin

Net Income/Revenue

Shows how much profit you are gaining from each sale

HIGHER IS BETTER

Operating Margin

Operating Income/Revenue * 100

the percentage of revenue a company keeps as profit after paying for their day-to-day operating costs

Gross Profit Margin

gross profit/revenue

Percentage of money left over from sales after paying for COGS

SG&A Expense Margin

SG&A Expense/ Revenue

the percentage of a company’s total revenue that goes toward SG&A expense

lower the better

Asset Turnover

Revenue/Assets

How efficiently the company is using their assets to generate sales

HIGHER IS BETTER 1 or over

PP&E Turnover

Revenue/PP&E net + Leased Profits

Company’s ability to generate sales from its fixed-asset investments

Higher= more efficient/productive use of PP&E

Days in Inventory

Inventory/COGS * 365

how long it takes a company to sell their inventory

Days in Receivables

Acc Receivable/Revenue

number of days it takes to collect receivables from your customers

Days in Payables

Accounts Payable/COGS

number of days it takes to pay your suppliers 

Cash Conversion Circle

DIO + DSO - DPO

• The number of days the company goes without cash 

• Lower the better because you would be getting the cash quicker

Financial Leverage

Assets/Equity

Determines if a company is using a lot of their equity to fund their assets

Lower= better/low risk (funding is sustained by EQUITY not DEBT)

Debt Ratio

Total liability/Total Assets

Lower = Less Risk

Tells us how well your assets can cover up your liabilities

Times Interest Earned

Operating Income/Interest Expense

How many times you can cover interest expense with the operating income you have on hand

Common-Sized Income Statement

Where each item on the income statement is taken as a percentage of revenue or net sales

net sales: amount of money a business makes from selling its goods or services after subtracting customer returns, price allowances, and sales discounts