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Financial Ratio Formulas

This document defines and provides formulas for various financial ratios used to analyze a company's liquidity, efficiency, leverage, profitability, and cash flow. The ratios measure things like a company's current ratio, accounts receivable turnover, debt ratio, times interest earned, gross profit margin, return on assets, and return on equity.

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Syed Shariq Ali
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145 views2 pages

Financial Ratio Formulas

This document defines and provides formulas for various financial ratios used to analyze a company's liquidity, efficiency, leverage, profitability, and cash flow. The ratios measure things like a company's current ratio, accounts receivable turnover, debt ratio, times interest earned, gross profit margin, return on assets, and return on equity.

Uploaded by

Syed Shariq Ali
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial Ratios

Liquidity Ratios
current assets
current ratio =
current liabilities

current assets − inventories


quick ratio =
current liabilities

Efficiency Ratios

accounts receivable
average collection period =
annual credit sales
360

credit sales
accounts receivable turnover =
accounts receivable

cost of goods sold


inventory turnover ratio =
inventories

sales
fixed asset turnover ratio =
net fixed assets

sales
total asset turnover ratio =
total assets

Leverage Ratios

current liabilities + noncurrent liabilities


debt ratio =
total assets
long − term liabilities
long − term debt to total capitalization ratio =
long − term debt + preferred stock + common stock

ebit
times interest earned ratio =
annual interest expense

ebit + lease expense + depreciation


cashflow overall coverage ratio =
preferred dividends principal payments
interest + lease expense + +
1 −t 1−t

Profitability Ratios

gross profit
gross profit margin =
net sales

ebit noi
operating profit margin = =
sales sales

net income
net profit margin =
sales

noi
operating income return on investment = roi =
total assets

net income
return on total assets ratio = roa =
total assets

net income available to common


return on common equity ratio = roe =
common stock

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