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Fin formulas

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Fin formulas

  1. 1. Financial ratio formulasPrepared by Pamela Peterson Drake1. Operating cycle Inventory InventoryNumber of days of inventory = = Average days cost of goods sold Cost of goods sold / 365 Accounts receivable Accounts receivableNumber of days of receivables = = Average days sales on credit Sales on credit / 365 Accounts payable Accounts payableNumber of days of payables = = Average days purchases Purchases / 365 Cost of Ending Beginning Note: Purchases = + + goods sold inventory inventory Number of days Number of daysOperating cycle = + of inventory of receivables Number of days Number of days Number of daysNet operating cycle = + − of inventory of receivables of purchases2. Liquidity Current assetsCurrent ratio = Current liabilitie s Current assets - InventoryQuick ratio = Current liabilitie s Current assets - Current liabilitie sNet working capital to sales ratio = Sales3. Profitability Gross incomeGross profit margin = Sales Operating incomeOperating profit margin = SalesFinancial ratio formula sheet, prepared by Pamela Peterson-Drake 1
  2. 2. Net incomeNet profit margin = Sales4. Activity Cost of goods soldInventory turnover = Inventory Sales on creditAccounts receivable turnover = Accounts receivable SalesTotal asset turnover = Total assets SalesFixed asset turnover = Fixed assets5. Financial leverage Total debtTotal debt to assets ratio = Total assets Long - term debtLong - term debt to assets ratio = Total assets Total debtTotal debt to equity ratio = Total shareholders equity Total assetsEquity multiplier = Shareholders equity Earnings before interest and taxesTimes - interest - coverage ratio = Interest Earnings before interest and taxes + Lease paymentFixed - charge coverage ratio = Interest + Lease paymentFinancial ratio formula sheet, prepared by Pamela Peterson-Drake 2
  3. 3. 6. Shareholder ratios Net income available to shareholdersEarnings per share = Number of shares outstanding Dividends paid to shareholdersDividends per share = Number of shares outstanding DividendsDividend payout ratio = Earnings Market price per sharePrice-earnings ratio = Earnings per share7. Return ratios Operating incomeBasic earning power ratio = Operating return on assets = Total assets Net incomeReturn on assets = Total assets Net incomeReturn on equity = Shareholders equityFinancial ratio formula sheet, prepared by Pamela Peterson-Drake 3

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