Ratio Analysis

Liquidity Ratios
Current Ratio
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Quick Ratio (Acid Test) =

(Current Assets/Current Liabilities)

(Current Assets - Inventory)/Current Liabilities

Asset Management Ratios

Inventory Turnover*
Days Sales Outstanding
Fixed Assets Turnover**
Total Assets Turnover

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(Cost of Goods Sold/Inventory)

(Accounts Receivable)/(Sales/365))
(Sales/Net Fixed Assets)
(Sales/Total Assets)

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(Liabilities/Assets)
(EBIT***/Interest)
(EBIT + Depreciation)/Interest

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(Sales Cost of Goods Sold)/Sales

(Operating Income/Sales)
(Net Income/Sales)
(Net Income/Assets)
(Net Income/Common Equity****)

Debt Management Ratios

Total Debt to Total Assets
Times Interest Earned
Cash Coverage Ratio

Profitability Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Assets
Return on Equity

Market Values
Price/Earnings Ratio
Market/Book Ratio
Dividend Yield

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(Market Price/Earnings Per Share)

(Market Price/Book Value)
(Dividends per Share/Market Price)

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*Some analysts calculate the Inventory Turnover Ratio as Sales//Inventory

**Net Fixed Assets typically refers to Net Property, Plant and Equipment. If Property,
Plant and Equipment is not specifically identified on the balance sheet, just use
long-term assets.
***EBIT stands for Earnings Before Interest and Taxes (sometimes referred to as
operating income).
****Common Equity is also referred to as Owners Equity or Stockholders Equity
Earnings per share = Net Income/Shares Outstanding
Book Value = Owners Equity/Shares Outstanding