Financial Ratios
What ratios measure management?
-A/R Turnover -Days Sales in A/R -Inventory Turnover -Days Sales in Inventory
What ratios measure efficiency?
-Asset Turnover Ratio
What ratios measure profitability?
-EPS -Book Value per Share -Price Earnings Ratio (P/E Ratio) -Return on Sales -Return on Equity
What ratios measure LEVERAGE?
-debt ratio -debt-to-equity ratio
What is Days Sales in A/R ratio?
365/A/R Turnover. Tells you the average number of days it takes to collect an account receivable.
What is the Days Sales in Inventory ratio?
365/Inventory Turnover. Tells you the number of days that it took to sell the inventory held during the specified one-year period.
What is the Inventory Turnover ratio?
COGS/Inventory. This tells you how many times Inventory was sold and replaced. The higher the inventory turnover ratio, the better, provided you are able to fill customers' orders on time. It would be foolish to lose customers because you didn't carry sufficient inventory quantities.
What is the Current Ratio?
Current Assests/Current Liabilities. Tells us how many times our current assets could pay off our liabilities.
What is the Price Earnings (P/E) ratio?
Market Value of Share/EPS. Tells you amount investors are willing to pay for each dollar of earnings; indication of growth potential A corporation with a high price earnings ratio is expected to have above average increases in its future earnings per share.
What is the EPS Ratio?
Net Income/# shares of stock outstanding. Tells you how much of net income is allocated to stock holders.
What is the Return on Sales ratio?
Net Income/Sales. Tells you number of pennies collected for each dollar of sales.
What is the Return on Equity Ratio?
Net Income/Stockholders Equity.
What is the Return on Equity ratio?
Net Income/Stockholders Equity. Tells you the number of pennies collected for each dollar invested.
What is Book Value per Share?
Owner's Equity/# shares of stock outstanding. Take all the money that comes from owner's equity and divide it by the shares of stock.
What is the A/R Turnover ratio?
Sales/A/R. Shows how many times A/R is turned into cash. (How many times A/R are collected). A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient.
What is the Asset Turnover Ratio?
Sales/Total Assets. Tells you the number of dollars of sales during the year generated by each dollar of assets.
What ratios measure LIQUIDITY?
The CURRENT RATIO measures LIQUIDITY
What is Leverage?
The amount of debt used to finance a firm's assets. In other words, how much of a company's financing comes from debt. A firm with significantly more debt than equity is considered to be highly leveraged.
What is the Debt Ratio?
Total Liabilities/Total Assets. The debt ratio indicates the percentage of the total asset amounts stated on the balance sheet that is owed to creditors. A high debt ratio indicates that a corporation has a high level of financial leverage.
What is the Debt-to-Equity ratio?
Total Liabilities/Total Owner's Equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity.
