Financial Management Ratios

What are the 2 Liquidity Ratios?

1. Current 2. Quick

Quick Ratio = ?

(Current Assets - Inventory) / Current Liabilities

What are the 3 Debt Management Ratios?

1. Debt Ratio 2. Debt to Equity 3. Times Interest Earned Ratio (TIE)

What are the 4 Asset Management Ratios?

1. Inventory Turnover Ratio 2. Days Sales Outstanding 3. Total Assets Turnover Ratio 4. Fixed Assets Turnover Ratio

What are the 3 Profitability Ratios?

1. Profit Margin on Sales 2. Return on Total Assets (ROA) 3. Return on Equity (ROE)

What does the debt to equity ratio show?

?

Days Sales Outstanding = ?

Accounts Receivables / (Sales or Revenues / 360 or 365)

Current Ratio = ?

Current Assets / Current Liabilities

Times Interest Earned Ratio = ?

EBIT or Operating Income / interest charges or expenses

What is the highest the quick ratio can be?

Equal to the current ratio. (If inventory is zero)

What is the largest the fixed asset turnover ratio can be?

Equal to the total asset turnover ratio (if all assets were fixed assets).

What does the inventory turnover ratio show?

How many times the inventory is turned over.

What does the days sales outstanding ratio show?

Indicates the average length of time the firm must wait after making a sale before it receives cash (payment).

What does the fixed asset turnover ratio show?

Measures how efficiently the firm uses its plant and equipment (fixed assets).

What does the Return on Assets ratio show?

Measures how much you gain for every 1 dollar invested in an asset.

What does the times interest earned ratio show?

Measures of the firm's ability to meet its annual interest payment...(How many times it can pay interest over)

What does the debt ratio show?

Measures the % of funds provided by creditors (debt) (reveals what % of assets were funded as a liability)

What does the quick ratio show?

Measures the firm's ability to pay off short - term obligations without relying on the sale of inventory

What does the profit margin on sales ratio show?

Measures the net income for every dollar of sales

What does the Return on Equity ratio show?

Measures the rate of return on common stockholders investment

What does the total asset turnover ratio show?

Measures the turnover of all the firm's assets

Return on Equity (ROE) = ?

Net Income / Common Equity

Profit Margin on Sales = ?

Net Income / Sales

Return on Total Assets (ROA) = ?

Net Income / Total Assets

Du Pont (ROA) = ?

Profit Margin * Total Asset Turnover

Du Pont (ROE) = ?

Profit Margin x Total Asset Turnover x Equity Multiplier (1/1-debt ratio)

Fixed Assets Turnover Ratio = ?

Sales / Net Fixed Assets

Total Assets Turnover Ratio = ?

Sales / Total Assets

Inventory Turnover Ratio = ?

Sales or COGS / Average Inventory

What does the current ratio show?

The extent to which current liabilities are covered by current assets that are expected to be converted to cash in the near future.

Debt Ratio = ?

Total Debt / Total Assets

Debt to Equity Ratio = ?

Total Debt / Total Equity