Financial Ratios a strategic manager must analysis

Ratio Name Formula Industry Meaning

Average
1. Gross Profit Net Sales − COGS/Net 77.04 Gross margin is a company's net sales
Margin Sales percent revenue minus its cost of goods sold
(COGS). In other words, it is the sales
revenue a company retains after
incurring the direct costs associated with
producing the goods it sells, and the
services it provides. The higher the
gross margin, the more capital a
company retains on each dollar of sales,
which it can then use to pay other costs
or satisfy debt obligations.

2. OperatingProfit Operating Income/Net 6.7% Operating Profit Margin is a

Margin Sales
profitability or performance ratio used
to calculate the percentage of profit a
company produces from its
operations, prior to subtracting taxes
and interest charges. It is calculated by
dividing the operating profit by total
revenue, and expressing as a
percentage.

3. Net Profit Margin Net Profit/Total 10% Net profit margin is the percentage of revenue left
after all expenses have been deducted from sales.
 Revenue The measurement reveals the amount of profit that
a business can extract from its total sales.
The net sales part of the equation is gross sales
minus all sales deductions, such as sales
allowances

4. Return of Total Earning Before Interest 20% Return on total assets is the ratio between net
income, which represents the amount of financial
Asset And Taxes/Average
and operational income a company has got during a
Total Assets
financial year, and total average assets, which is
the arithmetic average of total assets a company

5. ROA Net Income/Total 10% Return on assets (ROA) is an indicator of how

Asset profitable a company is relative to its total
assets. ROA gives a manager, investor, or
analyst an idea as to how efficient a company's
management is at using its assets to generate
earnings. Return on assets is displayed as a
percentage.

6. ROE Net Income/Total 15% Return on equity (ROE) is a measure of

Equity financial performance calculated by dividing
net income by shareholders' equity. Because
shareholders' equity is equal to a company's
assets minus its debt, ROE could be thought of
as the return on net assets.

7. ROIC/ROCE Net Operating Profit 2% Return on invested capital (ROIC) is a

After Tax/Invested calculation used to assess a company's
Capital efficiency at allocating the capital under its
control to profitable investments. The return on
invested capital ratio gives a sense of how well
a company is using its money to generate
returns.
8. Current Ratio Current Asset/Current 2.1 Times The current ratio compares all of a
Liability company’s current assets to its current
liabilities. These are usually defined as
assets that are cash or will be turned into
cash in a year or less, and liabilities that
will be paid in a year or less.

9. Working Capital Total Current Between The working capital ratio is a measure of
Assets/Total Current 1.2 and 2 liquidity, revealing whether a business can pay
Liabilities its obligations. The ratio is the relative
proportion of an entity's current assets to its
current liabilities, and shows the ability of a
business to pay for its current liabilities with its
current assets.

10. Debt To Asset Total Debt/Total Asset 33% The debt to total assets ratio is an indicator of a
Ratio company's financial leverage. It tells you
the percentage of a company's total assets that
were financed by creditors.

11. Long Term Debt Total Debt/Total Debt Less then The debt to capital ratio is a liquidity ratio that
To Capital Ratio + Shareholder Equity 1 calculates a company’s use of financial
leverage by comparing its total obligations to
total capital. In other words, this metric
measures the proportion of debt a company
uses to finance its operations as compared with
its capital.

12. Debt To Equity Totat Debt/Total 1 The debt-to-equity ratio (D/E) is a financial
Ratio Equity ratio indicating the relative proportion of
shareholders' equity and debt used to finance a
company's assets. Closely related to leveraging,
the ratio is also known as risk, gearing or
leverage.
13. Long Term Debt Long-term debt 1 to 1.5 The long-term debt to equity ratio is a method
To Equity Ratio /(Common stock + used to determine the leverage that a business
Preferred stock) has taken on. To derive the ratio, divide the
long-term debt of an entity by the aggregate
amount of its common stock and preferred
stock.

14. Time Interest Income Before Interest greater The times interest earned ratio, sometimes
Earn Ratio And Taxes or EBIT/ than 2.5 called the interest coverage ratio, is a coverage
Interest Expense ratio that measures the proportionate amount of
income that can be used to cover interest
expenses in the future.

15. Days Of 365/Inventory 10 Days in inventory formula tells you how many
Inventory Ratio Turnover days it takes for a firm to convert its inventory
into sales.

16. Inventory Total Sales/Total 7 times Inventory turnover ratio calculations

Turnover Ratio Inventory
may appear intimidating at first but
are fairly easy once a person
understands the key concepts
of inventory turnover.

17. Average 365 Days/Accounts 36.5 As the name suggests, the collection period is
Collection Period Receivable Turnover the time between the credit sales are made and
Ratio the cash is paid.

18. Dividend Yield Dividend Per 4 to 6 Dividend yield ratio shows what percentage of
on Common Stock Share/Market Value percent the market price of a share a company annually
Ratio Per Share pays to its stockholders in the form of
dividends. It is calculated by dividing
the annual dividend per share by market value
per share. The ratio is generally expressed in
percentage form and is sometimes
 called dividend yield percentage.

19. Price To Earning Price Per lower P/E The price-to-earnings ratio or P/E is one of the
Ratio Share/Earning Per ratio most widely-used stock analysis tools used by
Share investors and analysts to determine a stock's
valuation. The P/E shows whether a company's
stock price is overvalued or undervalued.

20. Dividend Payout Dividends Paid/Net 35% to A company's dividend payout ratio gives
Ratio Income 55% investors an idea of how much money it returns
to its shareholders compared to how much it
keeps on hand to reinvest in growth, pay off
debt, or add to cash reserves.

21. Internal Cash Internal cash flow is defined as the sum of

Flow earnings and depreciation cost published on
income statement and manufacturing
statement. Internal cash flow is mainly
increased by revenues from operating or the
disposal of firms' assets.

22. Free Cash Flow Operating Cash Flow - The Free Cash Flow (FCF) is a measure of how
Capital Expenditures more FCF much cash a company generates
a after accounting for the required working
company capital and capital expenditures (CAPEX) of
have, the the company. It is a measurement of
better it is a company’s financial performance and health.
The more FCF a company have, the better it is.

23. EPS Net Income/Common Earnings per share is the portion of a company's

Share Outstanding profit that is allocated to each outstanding share of

its common stock.
24. BPS One basis point is
equal to 1/100th of
1%, or 0.01%, or
0.0001, and is used to
denote the percentage
change in a financial
instrument.
Basis points (BPS) refers to a common unit of
measure for interest rates and other percentages
in finance. One basis point is equal to 1/100th
of 1%, or 0.01%, or 0.0001, and is used to
denote the percentage change in a financial
instrument.

25. CPS Cost/Number Of Sales Cash per share represents a company's total
cash divided by its number of shares
outstanding. Cash per share is the percentage of
a firm's share price that is immediately
accessible for spending on activities such
as research and development, mergers and
acquisitions, purchasing assets, paying down
debt, buying back shares and making dividend
payments to shareholders.

26. ROI Current Value of 10% Return on Investment (ROI) is a performance

Invesment - Cost Of measure used to evaluate the efficiency of an
Investment investment or compare the efficiency of a
number of different investments.

27. EVA NOPAT(Net High Economic value added (EVA) is a measure of a

Operating Profits After company's financial performance based on the
Tax) - residual wealth calculated by deducting its cost
{ WACC(Weighted of capital from its operating profit, adjusted for
Average Cost of taxes on a cash basis.
Capital) * capital
invested }
Reference:
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xt=Start%20calculating%20a%20company's%20gross,returns%2C%20allowance
s%2C%20and%20discounts.

https://www.investopedia.com/terms/n/net_margin.asp#targetText=Net%20
profit%20margin%20is%20the,a%20company%20translates%20into%20profit.

https://corporatefinanceinstitute.com/resources/knowledge/finance/wha
t-is-roic/

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y+average+financial+ratio&oq=working+capital+industry+average+financi
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