Equations Ratios

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Equations: Basic Financial Ratios

Liquidity:
Current Ratio Current Assets/Current Liabilities
Quick Ratio (Current Assets-Inventory)/Current Liabilities

Debt Management:
Debt Ratio Total Debt/Total Assets
D/E Ratio Total Debt/Total Equity
TIE EBIT/Interest Expense

Asset Efficiency:
Inventory T/O CGS/Average Inventory
Receivables T/O Credit Sales/Average Receivables
DSI 365/Inventory TO
DSO 365/ Receivables TO
Operating Cycle DSI+DSO
Payable T/O Credit Purchases/Average Payables
DPO 365/Payables Turnover
Cash Conversion Cycle DSI+DSO-DPO
Asset T/O Sales/Average Total Assets

Profitability:
Gross Profit Margin Gross Profit/Sales
Net Profit Margin Net Profit/Sales
ROA EBIT(1-T)/Average Total Assets
(Net Profit-Preferred Dividends)/Average Total
ROCE Common Equity

Market Value:
Total Common Equity/No. of Common Shares
Book Value/share outstanding
Market value/book value Market Price per share/Book Value per share
P/E Ratio Market Price/Earnings Per Share

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