Cia Part 2 - Ratios

Front 1

Inventory Turnover

Back 1

=cost of goods sold / Average Inventory

-measures the number of times during the year inventory is replaced
-higher number indicates greater efficiency

Front 2

Days' sales outstanding

Back 2

=accounts receivable/ (sales / 360 days)

-measure of a company's effectiveness in collecting accounts receivable
-smaller number for the ratio indicates greater effectiveness in managing and collecting money from customers

Front 3

Accounts payable turnover

Back 3

=accounts payable/ (purchases/360 days)

-includes all outstanding obligations that a company owes its creditors

Front 4

Fixed assets turnover

Back 4

=sales / average net fixed assets

-measure of how efficiently a company uses its fixed assets to generate sales
-higher the fixed assets ratio, the better

Front 5

Total assets turnover

Back 5

=sales/ average total assets

-measure of how well assets are being used to produce revenues

Front 6

Current ratio

Back 6

=current assets/ current liabilities
-measures an organization's potential for paying down current liabilities
-larger number for the ratio indicates more assets in relation to debt and therefore signals greater ability to pay holders of short-term debt

Front 7

Quick ratio

Back 7

=current assets-inventory / current liabilities
-eliminates inventory, which is considered the least liquid portion of current assets and therefore the least available for reducing current debts

Front 8

Net working capital

Back 8

=current assets - current liabilities
-measures the relationship of short-term debt to short-term assets by simply subtracting liabilities from assets

Front 9

Debt ratio

Back 9

=total liabilities/ total assets
-all organization's debt to all its assets provides a general measure to its ability to repay creditors
-the higher the number, the greater the firm's leverage

Front 10

Debt-to-equity ratio

Back 10

=long-term debt/ total equity
-measures the organization's ability to cover long-term liabilities from owners' equity

Front 11

Times interest earned ratio

Back 11

=earnings before interest and taxes (EBIT) / interest
-measures organization's ability to service all of its liabilities
-indicates number of times a company can cover fixed obligations with earnings before interst and taxes (EBIT)

Front 12

Fixed payment coverage ratio

Back 12

=earnings before interest and taxes (EBIT) / interest + (principle + preferred dividends) x [1/ (1-taxes)]
-organization's ability to pay fixed obligations within a set period of time

Front 13

Gross profit margin

Back 13

=sales-cost of goods sold/ sales
-money remaining from sales revenues after deduction for the cost of goods sold
-measure of probability

Front 14

Operating profit margin

Back 14

=operating profits/ sales
-measures operational efficiency as well as effective pricing and cost controls

Front 15

Net profit margin

Back 15

=net profit/sales
-measure of effectiveness of debt and tax management as well as effective management of operations, pricing, and cost controls

Front 16

Return on Investment (ROI)

Back 16

=total asset turnover x net profit margin
-known as dupont formula
-measuresan operation's effectiveness in using assets to generate profits

Front 17

Return on Equity (ROE)

Back 17

=net profits/ shareholders' equity
-measures the operation's relative success in generating net profits

Front 18

Return on capital

Back 18

=return on equity (RoE/ (1 + debt to equity ratio) or
=ROE x (1 - debt to capital)
-measures an operation's effectiveness in using debt and equity to generate earnings

Front 19

Earnings per share

Back 19

=total earnings/ no. of shares outstanding
-measure of company's value to investors