This document provides definitions and explanations of 14 key business ratios that are used to analyze a company's financial health and performance. The ratios are divided into categories of solvency ratios, profitability ratios, and efficiency ratios. Some of the ratios discussed include the quick ratio, current ratio, return on assets, return on net worth, inventory turnover, and collection period. These ratios measure factors such as a company's liquidity, profit margins, ability to generate sales, and efficiency in areas like collecting receivables.

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Key Business Ratios Fixed Assets = Fixed Assets
The 14 most widely used financial To Net Worth Net Worth
Reflects the portion of net worth that consists of fixed
ratios. assets. Generally a smaller ratio is desired.
Inventory Turnover = Sales
Every Dun's Financial Profile Report, PRO Report, Model Inventory
Statement and Industry Norm Report delivers the Determines the rate at which merchandise is being
advantage of D&B Norms and Key Business Ratios. moved and the effect on the flow of funds into a
These specific measures of business performance business.
provide significant insights into a company's financial
condition, based on its performance compared to others Assets to Sales = Total Assets
in its industry. Sales
This rate ties in sales and the total investment in assets
The Key Business Ratios used in Customized that is used to generate these sales.
Information Systems & Services include more than 8oo
lines of business segmented by up to 15 asset ranges Sales to Net = Sales _
and four geographic areas. Enables you to simplify your Working Capital Net Working Capital
(Net Working Capital = Current Assets-Current Liabilities)
evaluation of a company's financial condition with
Measures the efficiency of management to use its short-
objective, quantitative measures of performance.
term assets and liabilities to generate profit.
Here's what each of the 14 Key Business Ratios
Accounts Payable = Accounts Payable
used by Customized Information Systems and To Sales Sales
Services means: Measures the extent to which the supplier's money is
being used to generate sales. When this ratio is
SOLVENCY RATIOS multiplied by 365 days, it reflects the average number of
days it takes to pay its suppliers.
Quick Ratio = Cash + Accounts Receivable ---------------------------------------------------------------------------
Total Current Liabilities PROFITABILITY RATIOS
Shows the dollars of liquid assets available to cover each
dollar of current assets. Return on Sales = Net Profit After Taxes
(Profit Margin) Sales
Current Ratio = Total Current Assets Reveals profit earned per dollar of sales and measures
Total Current Liabilities efficiency of the operation.
Measures the margin of safety present to cover any
possible reduction of current assets. Return on Assets = Net Profit After Taxes
Total Assets
Current Liabilities = Total Current Liabilities This is the key indicator of profitability for a firm. It
To Net Worth Net Worth matches operating profits with the assets available to
Contrasts the amounts due creditors within a year with earn a return.
funds permanently invested by the owners. The smaller
the net worth and the larger the liabilities, the greater the Return on Net Worth = Net Profit After Taxes
risk. (Return on Equity) Net Worth
Analyzes the ability of the firm's management to realize
Current Liabilities = Total Current Liabilities an adequate return on the capital invested by the owners
To Inventory Inventory of the firm.
Tells how much a firm relies on funds from disposal of ------------------------------------------------------------------
unsold inventories to meet debt. EFFICIENCY RATIOS
Collection Period = Accounts Receivable X 365
Total Liabilities = Total Liabilities Sales days
To Net Worth Net Worth Reflects the average number of days it takes to collect
Compares the company's indebtedness to the venture receivables. Quality of receivables can be determined
capital invested by the owner. when compared with selling terms.
SAS 67 Key Business Ratios Page 1 of 1