TABLE 3.
8 Common Financial Ratios
I. Short-term solvency, or liquidity, ratios
Current ratio = Current assets/Current liabilities
Quick ratio = Current assets - Inventory/Current liabilities
Cash ratio = Cash/Current liabilities
Net working capital to total assets = Net working capital/Total assets Long-term debt ratio = Long-term debt/Long-term debt 1 Total equity
Interval measure = Current assets/Average daily operating costs
Interval measure = Current assets/Average daily operating costs
III. Asset management, or turnover, ratios
Inventory turnover = Cost of goods sold/Inventory
Days sales in inventory = 365 days/Inventory turnover
Days sales in inventory = 365 days/Inventory turnover
Receivables turnover = Sales/Accounts receivable
Days sales in receivables = 365 days/Receivables turnover
NWC turnover = Sales/NWC
Fixed asset turnover = Sales/Net fixed assets
Total asset turnover = Sales/Total assets
II. Long-term solvency, or financial leverage, ratios
Total debt ratio = Total assets - Total equity/Total assets
Debtequity ratio = Total debt/Total equity
Equity multiplier = Total assets/Total equity
Times interest earned ratio = EBIT/Interest
Times interest earned ratio = EBIT/Interest
Cash coverage ratio = EBIT + Depreciation/Interest
IV. Profitability ratios
Profit margin = Net income/Sales
Return on assets (ROA) = Net income/Total assets
Return on assets (ROA) = Net income/Total assets
Return on equity (ROE) = Net income/Total equity
ROE = Net income/Sales Sales/Assets Assets/Equity
V. Market value ratios
Priceearnings ratio = Price per share/Earnings per share
PEG ratio = Priceearnings ratio/Earnings growth rate (%)
Pricesales ratio = Price per share/Sales per share
Market-to-book-ratio = Market value per share/Book value per share
Tobins Q ratio = Market value of assets/Replacement cost of assets
Enterprise valueEBITDA ratio =Enterprise value/EBITDA