Accounting Ratios Ch. 12

Inventory Turnover Ratio formula

COGS/Average iventory

Current Ratio

Compares current assets to current liabilities.

Average Collection Period

Converts Receivable turnover ratio into days.

Acid-Test Ratio

Current Assets Available to pay current liabilities.

Risk Ratios for Solvency

Debt to Equity Ratio Times Interest Earned Ratio

Receivables Turnover Ratio

Measures how many times a comp. collects receivables during the year

receivables turnover ratio

Net Credit Sales/Average Accts. Rec

Return on Assets =

Profit Margin X Asset Turnover

Risk Ratios for Liquidity

Receivables turnover ratio Average Collection Period Inventory Turnover Ratio Average Days in Inventory Current Ratio Acid-test ratio

Times Interest Earned Ratio

compare interest payments with a company's ability to pay those charges.

Price-earnings ratio

compares a company's share price with its earnings per share

Average days in inventory

converts inventory turnover ratio into days.

Gross Profit ratio

indicates the portion of each dollar of sales above its cost of goods sold.

Profitability ratios

measure the earnings or operating effectiveness of a company.

Debt to Equity Ratio

measures a companies risk of bankruptcy

Inventory Turnover Ratio

measures how many times, on average, a company sells its entire inventory during the year.

Return on Equity

measures the income earned for each dollar in SE

Profit margin

measures the income earned on each dollar of sales.

Return on Assets

measures the income the company earns on each dollar invested in assets.

Asset Turnover

measures the sales volume in relation to the investment in assets.