All Introductory Formulas
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| Retention Rate | 1 - Payout Ratio | The percentage of net income that is retained to grow the business, rather than being paid out.
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| Internal Growth Rate | Retention Rate * ROBA | The maximum growth rate a firm can achieve without resorting to external financing.
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| Sustainable Growth Rate | Retention Rate * ROBE | The annual percentage of increase in sales defined by Retention, Profitability, Efficiency, and Leverage
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| Profit Margin | NI / Sales | The amount of net income earned with each dollar of sales generated.
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| Asset Turnover | Sales / Beginning Assets | The total sales generated per dollar of assets.
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| Financial Leverage (aka. Equity Multiplier) | Begin Assets / Beginning Equity | An indication of how asset purchases were financed. A high ratio indicates the company has used more debt than equity to finance asset purchases.
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| Gross Margin | Gross Profit / Sales | The percent of total sales revenue retained after incurring the direct costs associated with producing the goods and services it sells
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| Operating Margin | Operating Profit / Sales | Indicates how much profit a company makes on a dollar of sales, after paying for variable costs of production (wages, raw materials), but before paying interest or tax.
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| Net Margin | Net Income / Sales | Indicates how much profit each dollar of sales generates.
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| Return On Beginning Assets (ROBA) | Net Income / Beginning Assets | Indicates how efficiently a company is utilizing its assets.
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| Return On Beginning Equity (ROBE) | Net Income / Beginning Equity | An indication of profitability per dollar of beginning equity.
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| Return On Beginning Equity (ROBE) (DuPont Model) | Profit Margin * Asset Turnover * Financial Leverage | A measure which integrates Profitability, Efficiency, and Leverage, indicating profitability per dollar of equity.
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| Return On Ending Equity (ROEE) | Net Income / Ending Equity | An indication of profitability per dollar of ending equity.
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| Return on Invested Capital (ROIC) | EBIT * (1-Tax Rate) / Interest-bearing debt + Equity | Reflects how well a company is using its money to generate returns. It is used to assess a company's efficiency at allocating the capital under its control to profitable investments.
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| Pretax Return on Invested Capital | EBIT / Interest-bearing debt + Equity | Indicates the profitability, before interest and taxes, generated per dollar of invested capital.
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| Asset Turnover | Sales / Assets | Reflects how well a company is using it's assets to generate revenue. The revenue generated per dollar of assets.
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| Fixed Asset Turnover | Sales / Net PP&E | Reflects the ability to generate sales from fixed-asset investments (property, plant and equipment) net of depreciation.
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| Inventory Turnover | Sales / Inventory | How many times a company has sold and replaced inventory during a given period.
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| Days In Inventory | (Average Inventory / COGS) * 365 | The average number of days required to turn inventory into sales.
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| Collection Period | (Average Accounts Receivable / Credit Sales) * 365 | The average number of days it takes to receive payments owed.
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| Cash Conversion Cycle | Days In Inventory + Collection Period - Payables Period | The average number of days it takes to convert inventory and receivables to cash, net the average number of days taken to pay suppliers.
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| Payables Period | (Average Accounts Payable / Credit Purchases) * 365 | The average number of days taken to pay suppliers.
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| Current Ratio | Current Assets / Current Liabilities | The ability to pay short-term liabilities with short-term assets.
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| Quick Ratio | (Cash + Marketable Securities + Receivables) / Current Liabilities | Also known as the "acid-test" ratio, a more conservative reflection of the ability to pay short-term liabilities with short-term assets (excluding assets, such as inventory, which are more challenging to liquidate).
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| Cash Ratio | (Cash + ST Securities) / Current Liabilities | A very conservative evaluation of the ability to pay its short-term liabilities with very liquid, short term assets.
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| Interval Measure | (Cash + Securities + Receivables / Operations Costs) * 365 | How many days a company can cover it's daily operations costs with short-term assets (excluding inventory).
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| Debt Ratio | (Interest Bearing Debt + Leases) / (Int. Bearing Debt + Leases + Equity) | The extent to which debt has been used to finance operations. The fraction of capital provided by debt, as opposed to equity.
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| Times-Interest Earned Ratio | EBIT / Interest | A measure of how many times a company can cover its interest charges on a pretax earnings basis.
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| EBITDA Margin | EBITDA / Total Revenue | A firm's operating profitability as a percentage of its total revenue. Reflects operating profitability and cash flow.
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| Times-burden Covered | EBIT / Interest + (Principle Payments / 1 - Tax Rate) | Reflects how many times over a company could pay its outstanding debt installments using its earnings.
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| Debt To Equity | Total Liabilities / Total Shareholders' Equity | Assessment of financial leverage. The extent to which a company is taking on debt as a means of leveraging its assets.
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| Equity To Asset Ratio | Equity / Total Assets | The percentage of assets acquired without debt.
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| Fixed to Variable Cost | Fixed Costs / Variable Costs | A measure of risk, indicating the balance of fixed and variable costs
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| Sales to Fixed Costs | Sales / Fixed Costs | The revenue generated per dollar of fixed costs.
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| Contribution Margin | (Revenue - Variable Costs) / Sales | The marginal revenue generated per dollar of sales.
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| Payout Ratio | Dividends / Net Income | The ratio of how much is paid out to investors per dollar of earnings.
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| Days' Sales in Receivables | (Accounts Receivable / Sales) * 365 | The number of days it takes a company to collect cash from its credit sales
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| Days' to liquidate inventory | 365 / Inventory Turnover | The number of days it takes to sell the inventory on hand.
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| Payout Ratio (per share) | Dividends Per Share / Earnings Per Share | A per-share calculation of the payout ratio. Indicates how much is paid out to investors per dollar of earnings.
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| Days' Sales in Cash | (Cash + Securities) / (Sales / 365) | On average, the number days of average sales a company keeps in highly-liquid assets.
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