Ratios

types of solvency ratios

1. Debt to assets 2. Times Interest Earned

types of profitability ratios

1. Net Profit Margin 2. Gross Profit Percentage 3. Asset Turnover 4. Fixed Asset Turnover 5. Return on Equity 6. Earnings per Share 7. Price/earnings ratio

3 types of ratios

1. Profitability 2. Liquidity 3. Solvency

types of liquidity ratios

1. receivables turnover 2. Days to collect 3. Inventory turnover 4. Days to sell 5. Current ratio 6. Quick ratio

Price/Earnings ratio

How many times more than the current year's earnings investors are willing to pay for a company's common stock; higher means investors anticipate an improvement in the future

Return on equity Formula

Profitability; (Net income/average SE)*100

Times Interest earned ratio

Whether RESOURCES generated can cover interest costs; higher the better

Return on Equity

amount earned for each dollar invested by Stockholders; higher ratio means higher return on investment via dividends

Earnings per Share

amount of income generated for each share common stock owned by SE; higher ratio implies greater profitability

Fixed Asset Turnover ratio

dollars of revenue generated for each dollar invested in tangible fixed assets; higher ratio implies efficiency

Profitability ratios

examine company's ability to GENERATE INCOME

Liquidity ratios

helps tell if company has enough CURRENT assets to cover liabilities

Quick Ratio

if liquid assets can cover liabilities; higher the number, the quicker it can be paid off

quick ratio Formula

liquidity; (cash + short term investments + Net Acct Receivables)/Current liabilities

Days to collect Formula

liquidity; 365/ Receivables turnover ratio

days to sell Formula

liquidity; 365/Inventory turnover formula

Inventory Turnover Formula

liquidity; COGS/Avg inventory

receivables turnover Formula

liquidity; Net Sales Rev/Avg Net Receivables

current ratio Formula

liquidity; current assets/current liabilities

Net Profit Margin Formula

profitability; (net income/Total revenue)*100

Gross Profit Percentage Formula

profitability; <(Net Sales Rev - COGS)/Net Sales revenues> * 100

Earnings per share Formula

profitability; net income/Average number of common shares outstanding

Price/earnings ratio Formula

profitability; stock price/EPS

fixed asset turnover Formula

profitability; total revenues/ average net fixed assets

Asset Turnover Formula

profitability; total revenues/average total assets

Net Profit Margin

ratio indicates how much profit is earned from each dollar of revenue; tells 1. how much profit from each dollar 2. higher ratio means better performance

times interest earned Formula

solvency; (Net Income + Interest expense + Income tax expense)/ Interest Expense

debt to assets Formula

solvency; total liabilities/total assets

Solvency ratios

tells company's ability to pay interest and repay debt when due