WEEK 5 Analysis of Financial Statements: Financial Mix Ratio

LIQUIDITY RATIOS

• CURRENT RATIOS = CURRENT ASSETS/CURRENT LIABILITIES

• QUICK/ACID TEST RATIOS = QUICK ASSETS/CURRENT LIABILITIES

• Quick Assets = Cash + Trading Securities + Trade Receivables

• RECIEVABLE TURNOVER = NET CREDIT SALES/AVERAGE TRADE RECIEVABLE

• Average Trade Receivable = (Receivable, Beginning + Receivable, End) / 2

• INVENTORY TURNOVER = COST OF GOODS SOLD/AVERAGE INVENTORY

• Average Inventory = (Inventory, Beginning + Inventory, End) / 2

SOLVENCY RATIOS

• DEBT RATIOS = TOTAL LIABILITIES/TOTAL ASSETS

• EQUITY RATIOS = TOTAL EQUITY/TOTAL ASSETS

• DEBT-TO-EQUITY RATIOS = TOTAL LIABLITIES/TOTAL EQUITY

• TIME INTEREST EARND (TIE) = INCOME BEFORE INTEREST AND TAXES/INTEREST EXPENSE

• Income before interest and taxes = revenue - cogs - operating expense

• Income before interest and taxes = net income + interest + taxes

PROFITABLE RATIOS

• GROSS PROFIT RATE = GROSS PROFIT/NET SALES

• Gross Profit = Revenue - COGS

• OPERATING PROFIT MARGIN = OPERATING PROFIT/NET SALES

• Operating Profit = Gross Profit - Operating Expenses

• NET PROFIT MARGIN = NET INCOME/NET SALES

• RETURN ON INVESTMENT = NET INCOME/AVERAGE TOTAL ASSETS

• Total Assets = (year + year)/2