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Accounting Ratios
All calculations Accountants may need
| Ratio | Formula | Usage |
|---|---|---|
| Current Ratio | (Current Assets) / (Current Liabilities) | No. of times a company can pay off short-term debts. Used to evaluate business health |
| Working Capital | (Current Assets) - (Current Liabilities) | The amount of capital a business can currently use; short-term net value. |
| Quick Ratio | (Marketable Securities + Accounts Recievable + Cash) / Current Liabilities | How well a company would be able to pay off all of its debts if it were to go bankrupt in a year. |
| Price to Earnings Ratio | (Market Share per Share) / (Earnings per Share) | How much investors are willing to pay for each dollar of earnings. |
| Earnings per Share | (Net Income) - (Preferred Dividends) / (Avg. Common Shares Outstanding) | Amount of money you "earn" by holding a share. |
| Dividend Yield | (Preferred Dividends) / (Market Price per Share) | Proportion of money you recieve back in dividends. |
| Accounts Recievable Turnover | (Net Credit Sales) / (AVG. Accounts Recievable) | How many times per year a company collects all of its credit. |
| AR in Days or DSO | (Period Length) / (Accounts Recievable Turnover) | How long it takes to collect all of its credit. |
| Inventory Turnover | (Cost of Goods Sold) / (Avg. Inventory) | How many times a company sells its entire inventory. |
| Inventory Sale Period | (Period Length) / (Inventory Turnover) | How long it takes to sell its entire inventory. |
| Net Profit Margin | (Net Income) / (Net Sales) | How much of your net sales you are taking home after expenses. |
| Total Asset Turnover | (Net Sales) / (Avg. Total Assets) | How much sales are being generated by your current assets . |
| Return on Assets | (Net Income) / (Avg. Total Assets) | How much income is being generated by your current assets. |
| Operating Income Margin | (Operating Income) / (Net Sales) | How much profit a company makes after paying for overhead, but not interest and taxes. |
| Operating Asset Turnover | (Net Sales) / (Avg. Operating Assets) | Similar to total asset turnover, but only for operating assets. |
| Return on Equity | (Net Income after Tax) / (Avg. Stockholders Equity) | How effective issuing common stock has been to generate income. |
| Return on Investment | (Net Income) / (Avg. Long-Term Liabilities + Avg. Equity) | How effective financing has been to generate income. |
| Gross Profit Margin | (Gross Profit) / (Net Sales) | How much revenue remains after covering overhead costs. |
| Operating Ratio | (Cost of Goods Sold + Operating Expense) / (Net Sales) | How much revenue remains after covering overhead, I+T, and depreciation. |
| Equity to Assets | (Avg. Equity) / (Avg. Assets) | How much of a company is owned by its stockholders. |
| Times Interest Earned | (EBIT) / (Interest Expense) OR (Net Income + Interest + Taxes) | How many times a company can pay off its interest . |
| Debt Ratio | (Current Liabilities) / (Current Assets) | Indicates the proportion of assets financed by debt. |
| Cash Ratio | (Cash & Equivalents) / (Current Liabilities) | How much of current liabilities can be paid off with cash immediately |
| Debt to Equity Ratio | (Total Liabilties) / (Stockholders Equity) | Compares total debt to equity to evaluate financial leverage |
| Book Value Per Share | (Stockholders Equity) / (Total Outstanding Shares) | Equity Value per Share |
| Dupont Analysis of ROE | (Net Profit Margin) × (Asset Turnover) × (Equity Multiplier) | Analyzing each component of ROE can provide valuable insights in improving the ratio. |
| Defensive Interval | (cash + marketable securities + receivables)/average daily expenditures | How many days a business could sustain operations assuming they have no income. |
| Cash Conversion Cycle | (DSO) + (Days of Inventory on Hand) - (Days of Payables) | How it takes to convert investments into cash. |
| Payable Turnover | supply purchases/average trade payables | How often does a company pay its creditors/suppliers. |
| Days of Payables | Period Length / Payable Turnover | How long it takes for a company to pay its suppliers/creditors. |
| Financial Leverage Ratio | (Avg. Total Assets) / (Avg. Total Equity) | How much debt-financing a company has used to handle its finances. |
| Payback Period for an Investment | Initial Investment/Annual Cash Flows | How many years it takes to recoup cash from investment. |
| Accounting Rate of Return | (Avg. Net Income) / (Avg. Investment) | Simplest way of calculating rate of return |
Created by:
warhammeruser
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