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.
