Introduction to Finance

Chapter 3
Summary Ratios

a) Short-Term Solvency, or Liquidity, Measures:

1. Current Ratio =
2. Quick Ratio = =
3. Cash Ratio =

b) Asset Management, or Turnover, Measures:

4. Total Assets Turnover =

5. Receivable Turnover =

6. Average Collection Period (Days in Receivables) =

7. Inventory Turnover =

8. Days in Inventory =

c) Long-Term Solvency Measures:

9. Debt Ratio =

10. Debt-Equity Ratio =

11. Equity Multiplier =

12. Interest Coverage Ratio =

d) Profitability Measures:
13. Net Profit Margin =

14. Gross Profit Margin =

15. Net Return on Assets (ROA) =

16. Gross Return on Assets =

ROA = Profit Margin * Asset Turnover

17. Return on Equity =

ROE = Profit Margin * Asset Turnover * Equity Multiplier

18. Payout Ratio =

19. Retention Ratio =

Payout Ratio + Retention Ratio = 100%

20. Sustainable Growth Rate = ROE * Retention Ratio

21. Earnings per Share (EPS) =

22. Dividends per Share (DPS) =