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

Number of days of inventory =

Number of days of receivables =

Number of days of payables =

Accounts payable Accounts payable = Average day's purchases Purchases / 365
Note: Purchases =
Cost of Ending Beginning + + goods sold inventory inventory

Operating cycle =

Number of days Number of days + of inventory of receivables Number of days of inventory + Number of days Number of days − of receivables of purchases

Net operating cycle =

2.

Liquidity
Current assets Current liabilitie s

Current ratio =

Quick ratio =

Current assets - Inventory Current liabilitie s Current assets - Current liabilitie s Sales

Net working capital to sales ratio =

3.

Profitability
Gross income Sales
Operating income Sales

Gross profit margin =

Operating profit margin =

Financial ratio formula sheet, prepared by Pamela Peterson-Drake

1

term debt Total assets Total debt to assets ratio = Long .interest .coverage ratio = Fixed .charge coverage ratio = Earnings before interest and taxes + Lease payment Interest + Lease payment Financial ratio formula sheet.term debt to assets ratio = Total debt to equity ratio = Total debt Total shareholders' equity Equity multiplier = Total assets Shareholders' equity Earnings before interest and taxes Interest Times . prepared by Pamela Peterson-Drake 2 . Financial leverage Total debt Total assets Long .Net profit margin = Net income Sales 4. Activity Cost of goods sold Inventory Sales on credit Accounts receivable Inventory turnover = Accounts receivable turnover = Total asset turnover = Sales Total assets Sales Fixed assets Fixed asset turnover = 5.

prepared by Pamela Peterson-Drake 3 .6. Shareholder ratios Net income available to shareholders Number of shares outstanding Dividends paid to shareholders Number of shares outstanding Dividends Earnings Earnings per share = Dividends per share = Dividend payout ratio = Price-earnings ratio = Market price per share Earnings per share 7. Return ratios Operating income Total assets Basic earning power ratio = Operating return on assets = Net income Total assets Return on assets = Return on equity = Net income Shareholders' equity Financial ratio formula sheet.