Financial Ratios

Profit Margin

Net Income ÷ Net Sales = %

Return on Assets

Net Income ÷ Total Assets = %

Return on Equity

a. Net Income ÷ Shareholder's Equity = %

b. ROA/1 - Debt ÷ Total Assets = %

Receivable Turnover

Credit Sales ÷ Receivables = times

Average Collection Period

Accounts Receivable ÷ Average Daily Credit Sales

Inventory Turnover

Sales ÷ Inventory = times

Fixed Asset Turnover

Sales ÷ Fixed Assets = times

Total Asset Turnover

Sales ÷ Total Assets = times

Current Ratio

Current Assets ÷ Current Liabilities = Ratio

Quick Ratio or Acid-Test Ratio

Current Assets - Inventory - Prepayments ÷ Current Liabilities = Ratio

Debt to Total Assets

Total Debts ÷ Total Assets = %

Times Interest Earned

EBIT ÷ Interest Expense = times

Profitability Ratios

• Profit Margin

• Return on Assets

• Return on Equity

Asset Utilization Ratios

• Receivable Turnover

• Average Collection Period

• Inventory Turnover

• Fixed Asset Turnover

• Total Asset Turnover

Liquidity Ratios

• Current Ratio

• Quick Ratio or Acid-Test Ratio

Debt Utilization Ratios

• Debt to Total Assets

• Times Interest Earned