<div class="page plain article bird modern pid_4315 page-4315"> <div class="background"> </div> <article> <header> <div class="container"> <h1> Financial ratio formulas </h1> <div class="summary"> </div> <p class="byline"></p> </div><!--container--> </header> <section> <div class="container"> <p><img src="/uploads/5526641532602.gif"></p> <h1>1.Operating cycle </h1> <p>InventoryInventory</p><p>Number of days of inventory ₌ ₌ </p><p>Average day's cost of goods soldCost of goods sold / 365</p><p>Accounts receivable<u>Accounts receivable</u></p><p>Number of days of receivables ₌ ₌ </p><p>Average day's sales on creditSales on credit / 365</p><p>Accounts payable<u>Accounts payable</u></p><p>Number of days of payables ₌ ₌ </p><p>Average day's purchasesPurchases / 365</p><p>Note: Purchases = Cost of ₊Ending ₊Beginning goods sold inventory inventory</p><p>Number of daysNumber of days</p><p>Operating cycle = + </p><p>of inventoryof receivables</p><p>Number of daysNumber of daysNumber of days</p><p>Net operating cycle= + − of inventory of receivables of purchases</p> <h1>2.Liquidity </h1> <p><u>Current assets</u></p><p>Current ratio₌ Current liabilities</p><p><u>Current assets - Inventory</u></p><p>Quick ratio₌ Current liabilities</p> <h2>Current assets - Current liabilities</h2> <p>Net working capital to sales ratio₌ Sales</p> <h1>3.Profitability </h1> <p><u>Gross income</u></p><p>Gross profit margin ₌ Sales</p><p><u>Operating income</u> </p><p>Operating profit margin = </p><p>Sales</p><p><u>Net income</u></p><p>Net profit margin ₌ Sales</p> <h1>4.Activity </h1> <p><u>Cost of goods sold</u></p><p>Inventory turnover₌ Inventory</p><p>Sales on credit</p><p>Accounts receivable turnover₌ Accounts receivable</p><p>Sales</p><p>Total asset turnover₌ Total assets</p><p>Sales</p><p>Fixed asset turnover₌ Fixed assets</p> <h1>5.Financial leverage </h1> <p><u>Total debt</u></p><p>Total debt to assets ratio₌Total assets</p> <h2>Long - term debt</h2> <p>Long - term debt to assets ratio₌ Total assets</p><p>Total debt</p><p>Total debt to equity ratio₌ </p><p>Total shareholders' equity</p><p>Total assets</p><p>Equity multiplier = <img src="file:///C:\Users\Wensil\AppData\Local\Temp\msohtmlclip1\01\clip_image008.gif"> Shareholders' equity</p><p><u>Earnings before interest and taxes</u></p><p>Times -interest - coverage ratio₌ Interest</p> <h2>Earnings before interest and taxes Lease payment⁺</h2> <p>Fixed - charge coverage ratio₌ </p><p>InterestLease payment₊</p> <h1>6.Shareholder ratios </h1> <h2>Net income available to shareholders</h2> <p>Earnings per share₌ </p><p>Number of shares outstanding</p> <h2>Dividends paid to shareholders</h2> <p>Dividends per share ₌ Number of shares outstanding</p><p><u>Dividends</u></p><p>Dividend payout ratio = Earnings</p><p><u>Market price per share</u></p><p>Price-earnings ratio = Earnings per share</p> <h1>7.Return ratios </h1> <h2>Operating income</h2> <p>Basic earning power ratio = Operating return on assets = </p><p>Total assets</p><p><u>Net income</u></p><p>Return on assets = </p><p>Total assets</p><p>Net income</p><p>Return on equity = Shareholders' equity</p><h2>Some Commonly used online financial calculators;</h2><h3><a class="investments" href="http://www.acalculator.com/investments-calculators.html">Investment calculators</a> <span class="count">(21)</span></h3><h3><a class="savings" href="http://www.acalculator.com/savings-calculators.html">Savings calculators</a> <span class="count">(16)</span></h3><h3><a class="loan" href="http://www.acalculator.com/loan-calculators.html">Loan calculators</a> <span class="count">(9)</span></h3><h3><a class="tax" href="http://www.acalculator.com/tax-calculators.html">Tax calculators</a> <span class="count">(10)</span></h3><h3><a class="business" href="http://www.acalculator.com/business-calculators.html">Business calculators</a> <span class="count">(14)</span></h3><ul><li><a href="http://www.acalculator.com/auto-loan-early-payoff.html">auto loan payoff calculator</a></li><li><a href="http://www.acalculator.com/401k-savings-calculator.html">401(k) savings calculator</a></li><li><a href="http://www.acalculator.com/mortgage-payoff.html">mortgage payoff calculator</a></li><li><a href="http://www.acalculator.com/403b-retirement-savings-calculator.html">403(b) savings calculator</a></li><li><a href="http://www.acalculator.com/loan-comparison-calculator.html">loan comparison calculator</a></li><li><a href="http://www.acalculator.com/amortizing-loan-calculator.html">amortizing loan calculator</a></li><li><a href="http://www.acalculator.com/net-worth-canadian.html">net worth calculator</a></li><li><a href="http://www.acalculator.com/roth-vs-traditional-ira.html">roth or traditional ira calculator?</a></li><li><a href="http://www.acalculator.com/arm-vs-fixed-rate-mortgage.html">fixed rate versus adjustable rate mortgage calculator</a></li><li><a href="http://www.acalculator.com/roll-down-your-credit-card-debt%21.html">credit card chooser</a></li><li><a href="http://www.acalculator.com/credit-card-pay-off.html">credit card payoff calculator</a></li><li><a href="http://www.acalculator.com/business-debt-consolidation-calculator.html">debt consolidation calculator</a></li><li><a href="http://www.acalculator.com/compound-interest-and-your-return.html">compound interest and return calculator</a></li><li><a href="http://www.acalculator.com/long-term-care-calculator.html">long term care calculator</a></li><li><a href="http://www.acalculator.com/immediate-annuity-calculator.html">fixed annuity calculator</a></li><li><a href="http://www.acalculator.com/irr-calculator.html">irr calculator</a></li><li><a href="http://www.acalculator.com/investment-loan.html">investment loan calculator</a></li><li><a href="http://www.acalculator.com/investment-returns.html">investment returns calculator</a></li><li><a href="http://www.acalculator.com/mortgage-payoff.html">mortgage payoff calculator</a></li><li><a href="http://www.acalculator.com/traditional-ira-calculator/">traditional ira calculator</a></li><li><a href="http://www.acalculator.com/individual-401k-savings-calculator.html">individual 401(k) calculator</a></li><li><a href="http://www.acalculator.com/individual-401k-savings-calculator.html">individual 401(k) calculator</a></li></ul><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p><p><br></p> </div><!--container--> </section> </article> </div><!-- page-->