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Ratios Used in the Analysis of Financial Statements Liquidity Ratios:

Title Working Capital Current Ratio Formula Current assets Current Liabilities Current assets Current Liabilities Cash provided by operations Average current liabilities

Current cash debt coverage ratio

Inventory turnover ratio

Cost of goods sold Average inventory 365 days Inventory turnover ratio Net credit sales Average net receivables 365 days Receivables turnover ratio

Days in inventory

Receivable turnover ratio

Average collection period

Note: Average means to add the beginning and the ending balances together and then divide by 2.

Solvency Ratios:
Title
Debt to total assets ratio

Formula
Total liabilities Total assets Cash provided by operations Average total liabilities Net income + Interest expense + Tax Expense Interest expense Cash provided Capital Cash by Operations Expenditures dividends

Cash debt coverage ratio

Times interest earned ratio

Free cash flow

MJC Revised 10/2011

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Ratios Used in the Analysis of Financial Statements

Profitability Ratios:
Title Earnings per share Formula Net income Preferred stock dividends Average common shares outstanding Stock price per share Earnings per share Gross profit Net sales Net income Net sales Net income Average total assets Net sales Average total assets Cash dividends declared on common stock Net income Net income Preferred stock dividends Average common stockholders equity

Price-earnings ratio

Gross profit rate

Profit margin ratio

Return on assets ratio

Asset turnover ratio

Payout ratio

Return on common stockholders equity ratio

Note: If the corporation does not issue preferred stock than no preferred stock, dividend is declared.

MJC Revised 10/2011

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