Profitability Ratios
Gross margin
Operating profit margin
Profit margin
Return on assets (Return on
investment)
Return on common equity
Return on total equity
Utilization or Activity Ratios
Accounts Receivable
turnover
Average collection period
(Days' sales in receivable)
Inventory turnover
Days' sales in inventory
Operating cycle
Accounts payable turnover
Gross profit ÷ Net Measures the percentage of each peso sales
sales remaining after payment for the goods sold.
EBIT ÷ Net sales Measures the percentage of each peso sales
remaining after payment of all
Net income ÷ Net To find the proportion of revenue that finds its
sales way into profits.
Net income ÷ Average Measures the percentage return generated on
total assets the assets available (investment).
Profit margin x Asset * DuPont model
turnover
(Net income - Measures the percentage return generated to
preferred dividends) common stockholders.
÷ Average common
SHE
(Net income - Measures the percentage return generated to
preferred dividends) all the carrying amount of equity.
÷ Average SHE
Profit margin x Asset * DuPont model
turnover x Equity
multiplier
Net credit sales ÷ Measures the number of times per year the
Average accounts balance of receivables is collected.
receivable
365 ÷ AR Turnover Measures the average number of days it takes
to collect an account receivable.
Average AR ÷ Net
credit sales per day
COGS ÷ Average Measures the efficiency with which a firm
inventory utilizes (manages) its inventory. The higher the
inventory turnover rate, the more efficient the
inventory management of the entity. A high
rate may imply that the entity is not carrying
excess levels of inventory or inventory that is
obsolete.
365 ÷ Inventory Measures the average number of days that
turnover pass between the acquisition of inventory and
Average Inventory ÷ its sale.
COGS per day
Days' sale in The amount of time that passes between
inventory + Days' sale acquisition of inventory and the collection of
in receivables cash on the sale of that inventory.
Net credit purchases The number of times during a period that the
÷ Average accounts firm pays its accounts payable.
payable
Days' payable outstanding
(Average payable period)
Cash conversion cycle
Fixed asset turnover
Total asset turnover
Liquidity Ratios
Working capital
Current ratio
Quick or acid ratio
Debt Utilization (Earning Power) Ratios
Debt to total assets (Debt
ratio)
Debt to equity
Time interest earned
Equity multiplier (Financial
leverage or Leverage
Factor)
Valuation Ratios
Price-earnings ratio
365 ÷ Accounts Average time between the purchase of
payable turnover inventories and payment of cash
Average accounts
payable ÷ net credit
purchases per day
Average collection Amount of time that passes between the actual
period + Days' sales in outlay of cash for inventory purchases and the
inventory - Average collection of cash from the sale of that
payable period inventory.
Sales ÷ Average net Measures the efficiency with which a firm uses
fixed assets its fixed assets.
Sales ÷ Average total Measures the efficiency with which the firm
assets uses its total assets.
Current assets - Net working capital consists of the rersources
Current liabilities of the company would have to continue
operating in the short run if it had to settle all
of its current liabilities at once.
Current assets ÷ Measures short-term liquidity. A low current
Current liabilities ratio indicates a possible liquidity problem. An
overly high ratio indicates that management
may not be investing idle assets productively.
(Cash and equivalents Conservative measure of short-term liquidity. It
+ Marketable takes out inventories and prepayments because
securities + Net in times of financial difficulty they are difficult
receivables) ÷ Current to liquidate at their stated amounts.
Liabilities
Total liabilities ÷ Total Measures the portion of total assets financed
assets with debt and, therefore, the extent of financial
leverage.
Total liabilities ÷ Total Measures the extent of the firm's financial
equity leverage.
EBIT ÷ Interest Measures the firm's ability to make contractual
expense interest payments.
Average total assets ÷ The degree of debt (fixed financial costs) in the
Average equity firm's financial structure.
Market price per Measures the relationship between the shares'
share ÷ Earnings per market price and earnings per share. Growth
share companies are likely to have high PE ratio
Book value per share Common SHE ÷ Measures the amount of net assets available to
Number of common the shareholders of a given type of stock.
shares outstanding
Marker per book ratio Market price per Measures how high is the shares' market price
share ÷ Book value in relation to book value. Well-managed firms
per share should sell at high multiples of their book value.

Growth ratios
Basic earnings per share Income available to Reflects the company's earning power, i.e., its
common ability to generate income from normal
shareholders ÷ operations.
Average common
shares outstanding
Earnings yield Earnings per share ÷ Shows the relationship of earnings per share to
Market price per the market price per share.
share
Dividend payout ratio Cash dividend per Measures the dividend paid in relation to net
common share ÷ earnings.
Earnings per common
share
Dividend yield ratio Cash dividend per Measures the percentage of a share's market
common share ÷ price that was returned as dividends.
Market price per
common share