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