Financial Ratio Formulas

Financial ratio formulas Prepared by Pamela Peterson Drake

1.

Operating cycle Inventory Inventory = Average day's cost of goods sold Cost of goods sold / 365

Number of days of inventory =

Number of days of receivables =

Number of days of payables =

Accounts receivable Accounts receivable = Average day's sales on credit Sales on credit / 365

Accounts payable Accounts payable = Average day's purchases Purchases / 365 Note: Purchases =

Operating cycle =

Number of days Number of days + of inventory of receivables

Net operating cycle =

2.

Number of days of inventory

+

Number of days Number of days − of receivables of purchases

Liquidity

Current ratio =

Quick ratio =

Current assets Current liabilitie s

Current assets - Inventory Current liabilitie s

Net working capital to sales ratio =

3.

Cost of Ending Beginning + + goods sold inventory inventory

Current assets - Current liabilitie s Sales

Profitability

Gross profit margin =

Gross income Sales

Operating profit margin =

Operating income Sales

Financial ratio formula sheet, prepared by Pamela Peterson-Drake

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Net income Sales

Net profit margin =

4.

Activity

Inventory turnover =

Cost of goods sold Inventory

Accounts receivable turnover =

Sales on credit Accounts receivable

Total asset turnover =

Sales Total assets

Fixed asset turnover =

Sales Fixed assets

5.

Financial leverage

Total debt to assets ratio =

Total debt Total assets

Long - term debt to assets ratio =

Total debt to equity ratio =

Equity multiplier =

Long - term debt Total assets

Total debt Total shareholders' equity

Total assets Shareholders' equity

Times - interest - coverage ratio =

Fixed - charge coverage ratio =

Earnings before interest and taxes Interest

Earnings before interest and taxes + Lease payment Interest + Lease payment

Financial ratio formula sheet, prepared by Pamela Peterson-Drake

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6.

Shareholder ratios

Earnings per share =

Net income available to shareholders Number of shares outstanding

Dividends per share =

Dividends paid to shareholders Number of shares outstanding

Dividend payout ratio =

Dividends Earnings

Price-earnings ratio =

7.

Market price per share Earnings per share

Return ratios

Basic earning power ratio = Operating return on assets =

Return on assets =

Net income Total assets

Return on equity =

Net income Shareholders' equity

Operating income Total assets

Financial ratio formula sheet, prepared by Pamela Peterson-Drake

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