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Current Ratio: Liquidity Analysis Ratios

The document defines and provides formulas for various financial ratios used to analyze a company's liquidity, profitability, activity, capital structure, and capital market performance. These include current ratio, quick ratio, net working capital ratio, return on assets, return on equity, profit margin, earnings per share, assets turnover ratio, debt to equity ratio, interest coverage ratio, price earnings ratio, market to book ratio, dividend yield, and dividend payout ratio. It also shows the decomposition of return on assets into profit margin and assets turnover ratio.

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remyhame
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40 views

Current Ratio: Liquidity Analysis Ratios

The document defines and provides formulas for various financial ratios used to analyze a company's liquidity, profitability, activity, capital structure, and capital market performance. These include current ratio, quick ratio, net working capital ratio, return on assets, return on equity, profit margin, earnings per share, assets turnover ratio, debt to equity ratio, interest coverage ratio, price earnings ratio, market to book ratio, dividend yield, and dividend payout ratio. It also shows the decomposition of return on assets into profit margin and assets turnover ratio.

Uploaded by

remyhame
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Liquidity Analysis Ratios Current Ratio Current Ratio = Quick Ratio Quick Ratio = Quick Assets ---------------------Current Liabilities

Current Assets -----------------------Current Liabilities

Quick Assets = Current Assets - Inventories Net Working Capital Ratio Net Working Capital Ratio = Net Working Capital -------------------------Total Assets

Net Working Capital = Current Assets - Current Liabilities

Profitability Analysis Ratios Return on Assets (ROA) Return on Assets (ROA) = Net Income ---------------------------------Average Total Assets

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2 Return on Equity (ROE) Return on Equity (ROE) = Net Income -------------------------------------------Average Stockholders' Equity

Average Stockholders' Equity = (Beginning Stockholders' Equity + Ending Stockholders' Equity) / 2 Return on Common Equity (ROCE) Net Income

Return on Common Equity =

-------------------------------------------Average Common Stockholders' Equity

Average Common Stockholders' Equity = (Beginning Common Stockholders' Equity + Ending Common Stockholders' Equity) / 2 Profit Margin Profit Margin = Net Income ----------------Sales

Earnings Per Share (EPS) Earnings Per Share = Net Income --------------------------------------------Number of Common Shares Outstanding

Activity Analysis Ratios Assets Turnover Ratio Assets Turnover Ratio = Accounts Receivable Turnover Ratio Accounts Receivable Turnover Ratio = Sales ----------------------------------Average Accounts Receivable Sales ---------------------------Average Total Assets

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2 Inventory Turnover Ratio Inventory Turnover Ratio = Cost of Goods Sold --------------------------Average Inventories

Capital Structure Analysis Ratios Debt to Equity Ratio Debt to Equity Ratio = Total Liabilities ---------------------------------Total Stockholders' Equity

Interest Coverage Ratio Interest Coverage Ratio = Income Before Interest and Income Tax Expenses ------------------------------------------------------Interest Expense

Income Before Interest and Income Tax Expenses = Income Before Income Taxes + Interest Expense

Capital Market Analysis Ratios Price Earnings (PE) Ratio Price Earnings Ratio = Market Price of Common Stock Per Share -----------------------------------------------------Earnings Per Share

Market to Book Ratio Market Price of Common Stock Per Share Market to Book Ratio = ------------------------------------------------------Book Value of Equity Per Common Share Book Value of Equity Per Common Share = Book Value of Equity for Common Stock / Number of Common Shares Dividend Yield Dividend Yield = Annual Dividends Per Common Share -----------------------------------------------Market Price of Common Stock Per Share

Book Value of Equity Per Common Share = Book Value of Equity for Common Stock / Number of Common Shares Dividend Payout Ratio

Dividend Payout Ratio =

Cash Dividends -------------------Net Income

ROA = Profit Margin X Assets Turnover Ratio ROA = Profit Margin X Assets Turnover Ratio Net Income ROA = ------------------------ = Average Total Assets Profit Margin = Net Income / Sales Assets Turnover Ratio = Sales / Averages Total Assets Net Income -------------- X Sales Sales -----------------------Average Total Assets

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