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Flashcards in Ratio Formulas Deck (22):
1

Profitability Ratio

Measures firm's effectiveness in generating profit from operations

Gross Margin
Operating Margin
Return on Assets
Return on Equity
Dividend Payout Ratio

2

Gross Margin

Gross Profit / Net Sales

% of each sale after payment of goods sold

3

Operating profit Margin

Operating profit (EBIT) / Net Sales

4

Profit Margin

Net Income After Interest and Taxes / Net Sales

5

Return on Assets

Net Income after Interest and Taxes / Average Total Assets

% return on Assets

6

Return on Equity

Net income after taxes / Average common stockholders equity

% of return to shareholders

7

Rate of Return on Assets

(Net Income + Interest Expense) / Average total assets

8

Asset Utilization Ratios (Activity Ratios)

1) Measures time it takes to convert to cash
2) Measures efficiency Management of Assets

Turnover Ratios & number of days sales in inventory

9

Receivables Turnover

Net Credit Sales / Average A/R

Management efficiency of A/R

10

Inventory turnover

COGS / Average Inventory

Efficiently utilizing inventory

11

Number of days sales in Inventory

Average Inventory / (COGS/365)

12

Average collection period

Average A/R / Average Sales per day

Average Days to collect Receivables

13

Liquidity Ratio

Measures firm's ability to meet short term obligations

Current Ratio
Quick Ratio

14

Current Ratio

Current Assets / Current Liabilities

15

Quick Ratio

Current Assets - Inventory / CL

16

Debt Utilization Ratios

Measures effectiveness with Financing Firm's Assets

Debt to Asset
Debt to Equity
Times interest Earned

17

Debt to Asset

Total Liabilities / Total Assets

How much assets is financed with Debt

18

Debt to Equity

Total Liabilities / Total Equity

Measures Firm's Leverage

19

Times Interest earned

Earnings before Interest and Taxes / Interest Expense

Measures firm's ability to make interest payments

20

Market Ratios

Considers market value of firm's company stock

PE Ratio
Market Book Ratio

21

PE Ratio

Stock Price per share / Earnings per share

22

Market Book Ratio

Common Stock Equity / Number of common stock shares outstanding