Corporate Finance Ratios

Front 1

Operating Margin

Back 1

Operating Income
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Net Sales

Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.

Also known as "operating profit margin" or "net profit margin".

Front 2

Acid Test

Back 2

(Cash + Accounts Receivable + Short term investments)
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Current Liabilities

A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Front 3

Average Collection Period

Back 3

(Amount of Days in Period x Avg Amount of Accounts Receivable)
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Credit Sales

The approximate amount of time that it takes for a business to receive payments owed, in terms of receiveables, from its customers and clients.

Front 4

Debt Ratio

Back 4

Total Debt
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Total Assets

A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load.

Front 5

Gross Profit Margin

Back 5

Revenue - Cost of Goods Sold
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Revenue

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings.

Front 6

Operating Profit Margin

Back 6

Operating Income
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Net Sales

Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.

Front 7

Profit Margin

Back 7

Net profits
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Sales

Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.

Front 8

Return on Assets

Back 8

Net Income
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Total Assets

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".