accounting ratios

current ratio

if a company can pay off it’s short term liabilities with its short term assets

quick ratio (acid-test)

tests ability to pay short term debts without selling inventory (immediate liquidity)

working capital

short term financial health (if its positive you have more assets than liabilities)

accounts receivable turnover

how quickly customers pay (higher = faster collection)

days sales in receivables

shows average day to collect receivables (lower = faster cash collection)

inventory turnover

how often inventory sells during a period (higher = efficient sales/low stock)

days sales in inventory

average days inventory is held before sale (lower = faster inventory movement)

debt-to-equity ratio

measures long term risk, compares creditor financing to owner financing

times interest earned

shows how easily a company can pay interest on debt (higher = safer for lenders)

profit margin ratio

profitability from sales (higher = better control or pricing)

gross margin ratio

shows portion of each sales dollar left after covering COGS (indicates pricing strength)

return on assets (ROA)

measures efficiency of assets to generate profit

return on equity (ROE)

measures profitability to shareholders (higher = stronger return on investments)

earnings per share (EPS)

profit earned per share of common stock

price earnings (P/E) ratio

compares stock price to earnings

dividend yeild

measures return on investments via dividends

book value per share

accounting value of each share if the company is liquidated