Financial Ratios

Just to share to those who is interested to know the common Financial Ratios formulae used in assessing financial health of an organization.

Financial Ratios

a.       Liquidity Ratios

a.       Current Ratio = Current Assets/Current Liabilities

b.      Net Working Capital = Current Asset – Current Liabilities

c.       Quick Ratio = (Current Assets – Inventories)/Current Liabilities

b.      Activity Ratios

a.       Receivable Ratios

                                                               i.      Account Receivable Ratios Turnover = Sales/Account Receivables

                                                             ii.      Average Collection Period = Account Receivables/(Credit Sales/Period)

b.      Inventory Turnover Ratios

                                                               i.      Inventory Turnover = Sales/Inventory

                                                             ii.      Days Sales Inventory = Inventory/(COGS/Period)

                                                            iii.      Total Assets Turnover = Sales/Total Assets

                                                           iv.      Fixed Assets Turnover = Sales/Fixed Assets

c.       Solvency Ratios

a.       Debt Ratio = Total Debt (CL + LTD)/Total Assets

b.      Debt to Equity Ratio = Total Debt (CL + LTD)/Equity

c.       Time Interest Earned = EBIT/Interest

d.      Long Term Debt to Equity = LTD/Equity

d.      Profitability Ratios

a.       Gross Profit Margin = Gross Profit/Sales

b.      Net Profit Margin = Net Profit/Sales

c.       Operating Profit Margin = EBIT/Sales

d.      Return on Assets = Net Income/Total Assets

e.      Return on Investments =Net Income/Equity

f.        Return on Equity = Net Income/Equity

e.      Ownership Ratios

a.       Earnings Per Share = Net Income / No. of Shares

b.      Dividend Per Share = Dividend Payout/No. of Shares

c.       Dividend Payout Ratios = Dividend Per Share/Earning Per Share

d.      Price Earning = Market Price/Earnings Per Share

e.      Book Value Per Share = Equity/No. of Shares

f.        Market Capitalization = Market Price X No. of Shares

g.       Dividend Yield = Dividend Per Share/Market Price Per Share

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