Financial Ratios Refesher

© Agilecor 2001
Agilecor - Business Planning, Financial Management & Accounting Products & Services

1999

2000

2001

Comparative Balance Sheets
Cash Marketable securities Accounts receivable Inventory Total current assets Net fixed assets Total assets Accounts payable Accrued liabilities Notes payable Total current liabilities Long-term debt Common stock Retained earnings Total equity Total liabilities and equity $ 30 100 200 400 730 820 $ 1,550 $ 250 200 100 550 500 100 300 400 $ 1,450 $ 20 150 350 510 1,030 825 $ 1,855 $ 300 260 150 710 500 100 395 495 $ 1,705 $ 30 175 470 690 1,365 830 $ 2,195 $ 375 315 280 970 500 100 450 550 $ 2,020

Comparative Income Statements
Sales Cost of sales Gross profit Selling expenses General and admin expenses Operating profit Interest expense Pre-tax income Income taxes (40%) Net income $ 4,000 3,040 960 320 320 320 40 280 112 $ 168 $ 4,800 3,820 980 370 370 240 50 190 76 $ 114 $ 5,800 4,760 1,040 430 430 180 70 110 44 $ 66

Short term liquidity
Current ratio Measures the ability to pay current liabilities out of current assets. Current assets / Current liabilities = Current ratio Quick ratio (Acid Test) Measures the ability to pay current liabilities out of the most liquid of current assets. (Cash + Marketable secrities + Accounts receivable) 128295046.xls.ms_office/Financial Ratios (c) Agilecor 2001 1/4 730 550 1.33 1,030 710 1.45 1,365 970 1.41

30 100 200

20 150 350

30 175 470 2/7/2013/8:01 PM

470 2.855 0.15 25.855 495 3.xls.70 4. Cash flow from operations and interest / Interest expense = Times interest earned .91 365 14.03 400 180 2.ms_office/Financial Ratios (c) Agilecor 2001 1.income (interest coverage) Measures the ability to pay interest out of profits. Financial Management & Accounting Products & Services / Current liabilities = Quick ratio Accounts receivable turnover Measures the ability to collect from customers. Annual net credit sales / Average net account receivables = Accounts receivable turnover Average collection period (Days Sales Outstanding) Measures the average number of day that it takes to collect accounts receivable.550 0.000 200 20.88 264 50 5.cash flow (interest coverage) Total asstes to equity Total assets / Total stockholders equity = Total assets to equity Total liabilities to total assets 128295046.93 46.040 400 7.80 3.40 4.800 410 14.75 198 70 2.60 48.73 2001 970 0.00 4.Business Planning.80 1.760 600 7.820 455 8. Net income before interest expense and taxes / Interest expense = Times interest earned .93 365 7. Indicates the number of time inventory is sold or "turned" per year.67 320 40 8.15 365 20.28 1.40 43.income (interest coverage) Times interest earned .Financial Ratios Refesher © Agilecor 2001 Agilecor . 365 days / Inventory turnover = Days sales in inventory Inventory to net working capital Inventory / Net working capital = Inventory to net working capital 1999 550 0.800 275 17.80 180 70 2. Cost of goods sold / Average inventory = Inventory turnover Days sales in inventory Measures inventory levels based on days sales.01 690 395 1.050 1.45 5.00 240 50 4.00 18.cash flow (interest coverage) Measures the ability to pay interest out of cash flow.195 550 3.65 1.195 0. 365 days / Accounts receivable turnover = Average collection period (Days Sales Outstanding) Inventory turnover Measures the saleability of inventory.22 365 8.59 365 7.60 3.60 2000 710 0.57 352 40 8.45 20.68 1.83 2.99 2/4 2/7/2013/8:01 PM .25 365 17.48 510 320 1.550 400 3.210 1.75 Long term solvency Debt ratio Indicates the percentage of assets financed with debt or liabilities Total liabilities / Total assets = Debt ratio Times interest earned .

470 550 2.39 600 400 1.000 24.025 3.50 2001 1.2% 114 4. Sales / Average total assets = Total asset turnover 128295046.42 500 500 550 0.3% 168 400 42.6% 1.195 0.800 2.800 2.703 2.800 1.4% 240 4.800 5. Net income / Average total assets = Return on assets Return on equity Measures the profitibility of owners investments.550 0.800 3.195 0.4% 66 5.1% 168 4.050 400 2.5% 980 4.ms_office/Financial Ratios (c) Agilecor 2001 168 1.800 20.550 2.550 10.040 5.000 8.9% 180 5.8% 114 1.56 2000 1.65 1.44 650 1.58 4.0% 960 4.050 1. Net income / Sales = Profit margin Total asset turnover Measures the efficiency of assets used to produce sales.86 3/4 2/7/2013/8:01 PM .36 780 550 1.0% 114 448 25.xls.Business Planning.470 2.550 0.1% 4.703 6.63 600 1.800 17. Financial Management & Accounting Products & Services Total liabilities / Total assets = Total liabilities to total assets Total liabilities to equity Total liabilities / Total stockholders equity = Total liabilities to equity Interest bearing debt to total assets Interest bearing debt / Total assets = Interest bearing debt to total assets Interest bearing debt to equity Interest bearing debt / Total equity = Interest bearing debt to equity Long term debt to long term capital Long term debt / (Long term debt + Total equity) = Long term debt to long term capital 1999 1.855 0.210 495 2.7% 66 2. Net income / Average stockholders equity = Return on equity Gross margin Gross profit / Sales = Gross margin % Operating margin Operating profit / Sales = Operating margin Profit margin Measures the % of each $1 of revenue that is left over as profit.0% 66 523 12.000 4.025 2.50 500 500 400 0.48 Profitability Ratios Return on assets Measures the effectiveness of assets used to produce profits.67 1.82 5.35 650 495 1.800 1.855 0.67 780 2.210 1.68 1.31 500 500 495 0.0% 320 4.Financial Ratios Refesher © Agilecor 2001 Agilecor .000 1.

45 114 1.0% 4.06) 33.88 3.25 48.06 18.Days purchases in accounts payable = Days in Cash Operation Cycle 2.000 730 5. Financial Management & Accounting Products & Services 1999 Fixed assets turnover Measures the efficiency of fixed assets used to produce sales.8% 4.49 29.88 10.000 820 4.1% 2.025 3.01 (29.03 (33.215 338 12.5% 5.35 20.48 (29.2% 2.3% 12.760 250 11.703 6.80 46.198 4.7% 114 448 25.8% 42.550 400 3.84 4.04 33.550 10.7% 25.23 25.6% 2.Return on Equity Net profit after tax / Average stockholders equity = Return on equity or Average total assets / Average equity = Equity mutliplier x ROI = Return on equity 2000 2001 4.88 4.04 4.8% 168 400 42.0% 1.800 823 5.04 365 11.82 6.800 1.86 3.800 828 7.3% 1.xls.48 168 1.6% Other Ratios Accounts payable turnover Total purchases / Average accounts payable = Accounts payable turnover Days purchases in accounts payable 365 days / Account payable turnover = Days purchases in accounts payable Days in Cash Operation Cycle Average collection period (Days Sales Outstanding) + Days sales in inventory .ms_office/Financial Ratios (c) Agilecor 2001 4/4 2/7/2013/8:01 PM .23) 42.91 43.3% 66 523 12.84 66 2.21 3.4% 2.800 880 5.Business Planning.5% 1.01 5.58 128295046. Sales / Average fixed assets = Fixed asset turnover Current asset turnover Sales / Average current assets = Current asset turnover DuPont Return on Investment Net income / Average total assets = Return on investment or Net profit margin / Total asset turnover = Return on investment Modified DuPont .Financial Ratios Refesher © Agilecor 2001 Agilecor .49 365 12.35) 35.703 448 3.58 10.7% 2.420 275 12.025 523 3.44 29.44 365 12.80 6.

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