"Financial Ratio Formulas Template"

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Financial ratio formulas
Prepared by Pamela Peterson Drake
1.
Operating cycle
Inventory
Inventory
Number of days of inventory
=
=
Average day's cost of goods sold
Cost of goods sold / 365
Accounts receivable
Accounts receivable
Number of days of receivables
=
=
Average day's sales on credit
Sales on credit / 365
Accounts payable
Accounts payable
Number of days of payables
=
=
Average day's purchases
Purchases / 365
Cost of
Ending
Beginning
Note:
Purchases =
+
+
goods sold inventory
inventory
Number of days Number of days
Operating cycle
=
+
of inventory
of receivables
Number
of
days
Number
of
days
Number
of
days
=
+
Net
operating
cycle
of
inventory
of
receivable
s
of
purchases
2.
Liquidity
Current
assets
=
Current
ratio
Current
liabilitie
s
Current
assets
-
Inventory
Quick
ratio
=
Current
liabilitie
s
Current
assets
-
Current
liabilitie
s
Net
working
capital
to
sales
ratio
=
Sales
3.
Profitability
Gross income
Gross profit margin
=
Sales
Operating income
Operating profit margin =
Sales
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
1
Financial ratio formulas
Prepared by Pamela Peterson Drake
1.
Operating cycle
Inventory
Inventory
Number of days of inventory
=
=
Average day's cost of goods sold
Cost of goods sold / 365
Accounts receivable
Accounts receivable
Number of days of receivables
=
=
Average day's sales on credit
Sales on credit / 365
Accounts payable
Accounts payable
Number of days of payables
=
=
Average day's purchases
Purchases / 365
Cost of
Ending
Beginning
Note:
Purchases =
+
+
goods sold inventory
inventory
Number of days Number of days
Operating cycle
=
+
of inventory
of receivables
Number
of
days
Number
of
days
Number
of
days
=
+
Net
operating
cycle
of
inventory
of
receivable
s
of
purchases
2.
Liquidity
Current
assets
=
Current
ratio
Current
liabilitie
s
Current
assets
-
Inventory
Quick
ratio
=
Current
liabilitie
s
Current
assets
-
Current
liabilitie
s
Net
working
capital
to
sales
ratio
=
Sales
3.
Profitability
Gross income
Gross profit margin
=
Sales
Operating income
Operating profit margin =
Sales
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
1
Net income
Net profit margin
=
Sales
4.
Activity
Cost
of
goods
sold
Inventory
turnover
=
Inventory
Sales
on
credit
Accounts
receivable
turnover
=
Accounts
receivable
Sales
Total
asset
turnover
=
Total
assets
Sales
Fixed
asset
turnover
=
Fixed
assets
5.
Financial leverage
Total
debt
Total
debt
to
assets
ratio
=
Total
assets
Long
-
term
debt
Long
-
term
debt
to
assets
ratio
=
Total
assets
Total
debt
Total
debt
to
equity
ratio
=
Total
shareholde
rs'
equity
Total assets
Equity multiplier =
Shareholders' equity
Earnings
before
interest
and
taxes
Times
-
interest
-
coverage
ratio
=
Interest
Earnings
before
interest
and
taxes
+
Lease
payment
Fixed
-
charge
coverage
ratio
=
Interest
+
Lease
payment
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
2
6.
Shareholder ratios
Net
income
available
to
shareholde
rs
Earnings
per
share
=
Number
of
shares
outstandin
g
Dividends paid to shareholders
Dividends per share
=
Number of shares outstanding
Dividends
Dividend payout ratio =
Earnings
Market price per share
Price-earnings ratio =
Earnings per share
7.
Return ratios
Operating income
Basic earning power ratio = Operating return on assets =
Total assets
Net income
Return on assets =
Total assets
Net income
Return on equity =
Shareholders' equity
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
3
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