Ratios

Return on Equity

Return on Equity = Return on Income / Owner's Equity - Measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. - For high growth companies you should expect a higher ROE.

Return on Sales

Return on Sales = Net Income/Net Sales - Used to evaluate a company's operational efficiency - Increasing ROS indicates the company is growing more efficient. - Decreasing ROS could signal looming financial troubles.

Accounts Receivable

Accounts Receivable = Accounts Receivable/Sales - Refers to money owed by customers to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. - If a company has receivables, this means it has made a sale but has yet to collect the money from the purchaser.

Earnings Per Share

Earnings per Share =Net income / Shares Outstanding - The portion of a company's profit allocated to each outstanding share of common stock.

Current Ratio

Current Ratio = Current Assets/Current Liabilities A current ratio below 1.0 signifies that a company does not have enough current assets to pay short-term liabilities. The higher the better.

Debt to Equity

Debt to Equity = Total Liabilities/Equity - Indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity. - High debt/equity ratio means that a company has been heavily taking on debt (high risk)

Inventory Turnover

Inventory Turnover = Cost of Goods Sold/Avg Inventory - Showing how many times a company's inventory is sold and replaced over a period. - Low turnover implies poor sales and excess inventory. - High ratio implies either strong sales or ineffective buying.

Quick Ratio

Quick Ratio = (Cash + Marketable Securities + Receivables )/Current Liabilities - Measures the dollar amount of liquid assets available for each dollar of current liabilities. - A quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities. - The higher the quick ratio, the better the company's liquidity position