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TABLE 3.8 Common Financial Ratios I. Short-Term Solvency, or Liquidity, Ratios II. Long-Term Solvency, or Financial Leverage, Ratios

This document outlines common financial ratios used to analyze the financial performance and health of a business. The ratios are organized into five categories: I) short-term solvency ratios that measure liquidity, II) long-term solvency ratios that measure financial leverage, III) asset management ratios that measure efficiency, IV) profitability ratios that measure returns, and V) market value ratios that compare market and book values. Examples of key ratios provided include the current ratio, debt-to-equity ratio, inventory turnover, return on equity, and price-earnings ratio.

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118 views

TABLE 3.8 Common Financial Ratios I. Short-Term Solvency, or Liquidity, Ratios II. Long-Term Solvency, or Financial Leverage, Ratios

This document outlines common financial ratios used to analyze the financial performance and health of a business. The ratios are organized into five categories: I) short-term solvency ratios that measure liquidity, II) long-term solvency ratios that measure financial leverage, III) asset management ratios that measure efficiency, IV) profitability ratios that measure returns, and V) market value ratios that compare market and book values. Examples of key ratios provided include the current ratio, debt-to-equity ratio, inventory turnover, return on equity, and price-earnings ratio.

Uploaded by

Jainil Shah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TABLE 3.

8 Common Financial Ratios


I. Short-term solvency, or liquidity, ratios II. Long-term solvency, or financial leverage, ratios
Current ratio = Current assets/Current liabilities Total debt ratio = Total assets - Total equity/Total assets
Quick ratio = Current assets - Inventory/Current liabilities Debtequity ratio = Total debt/Total equity
Cash ratio = Cash/Current liabilities Equity multiplier = Total assets/Total equity
Net working capital to total assets = Net working capital/Total assets Long-term debt ratio = Long-term debt/Long-term debt 1 Total equity
Interval measure = Current assets/Average daily operating costs Times interest earned ratio = EBIT/Interest
Interval measure = Current assets/Average daily operating costs Times interest earned ratio = EBIT/Interest
Cash coverage ratio = EBIT + Depreciation/Interest
III. Asset management, or turnover, ratios IV. Profitability ratios
Inventory turnover = Cost of goods sold/Inventory Profit margin = Net income/Sales
Days sales in inventory = 365 days/Inventory turnover Return on assets (ROA) = Net income/Total assets
Days sales in inventory = 365 days/Inventory turnover Return on assets (ROA) = Net income/Total assets
Receivables turnover = Sales/Accounts receivable Return on equity (ROE) = Net income/Total equity
Days sales in receivables = 365 days/Receivables turnover ROE = Net income/Sales Sales/Assets Assets/Equity
NWC turnover = Sales/NWC V. Market value ratios
Fixed asset turnover = Sales/Net fixed assets Priceearnings ratio = Price per share/Earnings per share
Total asset turnover = Sales/Total assets PEG ratio = Priceearnings ratio/Earnings growth rate (%)
Pricesales ratio = Price per share/Sales per share
Market-to-book-ratio = Market value per share/Book value per share
Tobins Q ratio = Market value of assets/Replacement cost of assets
Enterprise valueEBITDA ratio =Enterprise value/EBITDA

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