Measures ability to meet current debts with current assets.
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Liquidity
Quick Ratio (Acid-Test)
CA-inv/CL
Measures ability tomeet current debts with most-liquid (quick) current assets.
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Liquidity
Debt - to - equity
total debt/shareholders' equity(total equity)
indicates the extent to which debt financing is used relative to equity financing.
%
Leverage
debt-to-total assets (debt ratio)
total debt/total assets
Shows the relative extent to which the firm is using borrowed money.
%
Leverage
Interest Coverage
EBIT/ interest expense
indicates ability to cover interest charges; tells number of times interest is earned.
#
Leverage
Receiveable Turnover (RT)
annual net credit sales/receivables
Measures how many times the receivables have been turned over (into cash) during the year; provides insight into quality of the receivables.
#
Activity
receivable turnover in days (RTD)
365/RT
Average number of days receivables are outstanding before being collected
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Activity
Inventory Turnover (IT)
COGS/inventory
Measures how many times the inventory has been turned over(sold) during the yr; provides insight into liquidity of inventory and tendency to overstock.
#
Activity
Inventory Turnover in Days (ITD)
365/IT
Average number of days the inventory is held before it is turned into accounts receivable through sales.
#
Activity
Total Asset Turnover (Capital Turnover)
Sales/total assets
Measures the relative efficiency of total assets to generate sales.
#
Activity
Net Profit Margin (Return on Sales)
Net Profit after Tax/ sales
Measures profitability with respect to sales generated; net income per dollar of sales.
%
profitability
Return on Investment (ROI) (return on assets)
net profit after taxes/total assets {=Net profit margin/total asset turnover}
Measures overall effectiveness in generating profits with available assets; earning power of invested capital
Profitability
Return on Equity (ROE)
net profit after taxes/ shareholders' equity
Measures earning power on shareholders' book-value investment (eat/common equity)