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Financial Ratios Formulas
Financial Ratios Formulas
1.
Operating cycle
Inventory Inventory = Average day's cost of goods sold Cost of goods sold / 365 Accounts receivable Accounts receivable = Average day's sales on credit Sales on credit / 365
Operating cycle =
Number of days Number of days + of inventory of receivables Number of days of inventory + Number of days Number of days of receivables of purchases
2.
Liquidity
Current assets Current liabilitie s
Current ratio =
Quick ratio =
Current assets - Inventory Current liabilitie s Current assets - Current liabilitie s Sales
3.
Profitability
Gross income Sales
Operating income Sales
4.
Activity
Cost of goods sold Inventory
Sales on credit Accounts receivable
Inventory turnover =
5.
Financial leverage
Total debt Total assets Long - term debt Total assets
Equity multiplier =
Earnings before interest and taxes + Lease payment Interest + Lease payment
6.
Shareholder ratios
Net income available to shareholders Number of shares outstanding Dividends paid to shareholders Number of shares outstanding Dividends Earnings
Price-earnings ratio =
7.
Return ratios
Operating income Total assets
Basic earning power ratio = Operating return on assets = Net income Total assets
Return on assets =
Return on equity =