Financial Ratios

2. .
Ratio How Calculated
ProfitabilityRatios:
1) GrossProfitMargin Sales- CostOf GoodsSold/ Sales
2) OperatingProfitMargin Profitbefore interest&Tax/ Sales
3) NetProfitMargin Profitaftertax/ Sales
4)ReturnonTotal Assets
Profitaftertax/Total Assets
Profitaftertax +Interest/Total
Assets

3. .
Ratio How calculated
5. Return on stockholder’s
equity
(or return on net worth)
Profit after taxes
Total stock – holder’s equity
6. Return on
common equity
Profit after taxes – Preferred stock
dividends
Total stock – holder’s equity – par value
of preferred stock
7. Earnings per share Profit after taxes – Preferred stock
dividends
No. of shares of common stock
outstanding

4. .
Ratio HowCalculated
LiquidityRatios:
1)CurrentRatio CurrentAssets/CurrentLiabilities
2)QuickRatio CurrentAssets-Inventory/CurrentLiabilities
3)Inventory/WorkingCapitalRatio Inventory/CurrentAssets-CurrentLiabilities

5. .
Ratio HowCalculated
LeverageRatios:
1)DebttoAssetRatio TotalDebt/TotalAssets
2)DebttoEquityRatio TotalDebt/TotalStockholdersEquity
3)LongTermDebttoEquityRatio LongTermDebt/TotalStockholdersEquity
4)TimesInterestEarned
ProfitbeforeInterest&Taxes/TotalInterest
charges

6. .
Ratio How calculated
ACTIVITY RATIOS
1. Inventory Turnover Sales/Inventory of finished goods
2. Fixed assets Turnover Sales /Assets
3. Total assets Turnover Sales / Total Assets
4. Accounts receivable
Turnover
Annual Credit Sales / Accounts receivable
5. Average Collection Period Accounts receivable
Total sales / 365
Or
Accounts receivable
Average daily sales

7. .
Ratio How calculated
ACTIVITY RATIOS
1. Inventory Turnover Sales/Inventory of finished goods
2. Fixed assets Turnover Sales /Assets
3. Total assets Turnover Sales / Total Assets
4. Accounts receivable Turnover Annual Credit Sales / Accounts receivable
5. Average Collection Period Accounts receivable
Total sales / 365
Or
Accounts receivable
Average daily sales

8. .
RATIO HOW CALCULATED
OTHER RATIOS
1. Dividend yield on
common stock
Annual dividend per share
Current earnings per share
2. Price – earnings (P/E) ratio Current earnings per share
After earnings per share
3. Dividend payout ratio Annual dividends per share
After tax earnings per share
4. Cash flow per share After tax profits + Depreciation
No. of common shares outstanding