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Financial Ratio Formulas: 1. Operating Cycle
Financial Ratio Formulas: 1. Operating Cycle
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
Accounts payable
Accounts payable
=
Average day's purchases
Purchases / 365
Note: Purchases =
Operating cycle =
2.
Number of days
of inventory
of receivables
of purchases
Liquidity
Current ratio =
Quick ratio =
Current assets
Current liabilitie s
3.
Cost of
Ending
Beginning
+
+
goods sold inventory inventory
Profitability
Gross income
Sales
Operating income
Sales
Net income
Sales
4.
Activity
Inventory turnover =
Sales on credit
Accounts receivable
Sales
Total assets
Sales
Fixed assets
5.
Financial leverage
Total debt
Total assets
Equity multiplier =
Total debt
Total shareholders' equity
Total assets
Shareholders' equity
6.
Shareholder ratios
Dividends
Earnings
Price-earnings ratio =
7.
Return ratios
Return on assets =
Net income
Total assets
Return on equity =
Net income
Shareholders' equity
Operating income
Total assets