Name : ……………………………………….. Roll No …………………………………….

Class Activity
Calculate Ratios from your one Company From 2016 to 2020
1- Net Margin Formula = Net Income / Sales
Net Margin is basically the net effect of operating as well as financing decisions taken by the company. It is
called a Net Margin because, in the numerator, we have Net Income (Net of all the operating expenses, interest
expenses as well as taxes)
2- Operating Profit Margin = EBIT / Sales
Operating profit or Earnings Before Interest and Taxes (EBIT) margin measures the rate of profit on sales after
operating expenses. Operating income can be thought of as the “bottom line” from operations.
3- Receivables Turnover Formula = Credit Sales / Accounts Receivables
Accounts Receivables Turnover Ratio can be calculated by dividing Credit Sales by Accounts Receivables.
Intuitively. It provides us the number of times Accounts Receivables (Credit Sales) is converted into Cash
Sales.
4- Accounts Receivables Days Formula = Number of Days in Year / Accounts Receivables Turnover
Days receivables are directly linked with the Accounts Receivables Turnover. Days receivables express the
same information but in terms of the number of days in a year. This provides an intuitive measure of
Receivables Collection Days.
5- Inventory Turnover Formula = Cost of Goods Sold / Inventory
The Inventory Ratio means how many times the inventories are restored during the year. It can be calculated by
taking the Cost of Goods Sold and dividing it by Inventory.
6- Inventory Days Formula = Number of days in a year / Inventory Turnover.
Think of Inventory Days as the approximate number of days it takes for inventory to convert into a finished
product.