Financial Ratios

Liquidity Ratios:
Current Asset Current Assets - Inventory
Current Ratio = Current Liabilities Quick Ratio = Current Liabilities

Activity Ratios:
Cost of Goods Sold
Inventory Turnover = Average Collection Period =
Inventory
Accounts Receivable Accounts Receivable
= Annual Sales⁄
Average Sales per Day 365

Accounts Payable Accounts Payable

Average Payment Period = = Annual Purchases⁄
Average Purchases per Day 365
Sales
Total Asset Turnover= Total Assets

Debt Ratios (Leverage Ratios, Capital Structure Ratios):

Total Liabilities Total Assets
Debt Ratio = Total Assets Financial Leverage Multiplier = Total Shareholder Equity

Coverage Ratios:
Earnings Before Interest & Taxes (EBIT)
Times Interest Earned = Interest Expense

EBIT +Depreciation + Amortization + Impairment

EBITDA Ratio= Interest Expense + Current Portion Long-term Debt
EBIT + Lease Payments
Fixed Payment Coverage Ratio =
Interest Expense + Lease Payments +(Principal Payment ×[1⁄(1−Tax Rate)])

Profitability Ratios:
Gross Profit Operating Profit
Gross Profit Margin = Sales Operating Profit Margin=
Sales
Net Income Net Income
Net Profit Margin= Earnings Per Share (ROA)=
Sales # of Common Shares
Net Income Net Income
Return on Assets= Return on Equity (ROE)= Common Stockholder Equity
Total Assets

Market Ratios:
Price Per Share
Price/Earnings (P/E) Ratio = Earnings Per Share
Price Per Share
Market/Book (M/B) Ratio=Common Stockholder' s Equity
⁄
# of Common Shares

DuPont Identities:
ROA = Net Profit Margin × Total Asset Turnover
ROE = ROA × Financial Leverage Multiplier
 Other Useful Formulas
𝑟 𝑚
Effective Annual Rate = EAR = (1 + 𝑚) − 1

𝑃𝑀𝑇
Present Value of a Perpetuity: 𝑃𝑉 = 𝑟

𝐷0 (1+𝑔)
Gordon Growth Model: 𝑃0 = 𝑟𝑠 −𝑔

Capital Asset Pricing Model: 𝑟𝑠 = 𝑅𝐹 + [𝑏𝑗 (𝑟𝑚 − 𝑅𝐹 )]

Portfolio Return (weighted average return for a portfolio) = E(Return) = 𝜇 = 𝑟̂ = ∑𝑛𝑖=1 𝑝𝑖 𝑟𝑖

Useful Excel Formulas

Present Value: =PV(…) Future Value: =FV(…)

Interest Rate: =Rate(…) Term: =NPER(…)

Payment: =PMT(…) PV of different CF: =NPV(…)