Current Ratio Current assets Current liabilities Current Ratio A liquidity ratio that measures a company s ability to pay short term obligations The higher the current ratio the more capable the company is of paying its obligations A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point Quick Ratio Quick Assets cash marketable securities and accounts receivable Current Liabilities Quick Ratio measures a company s ability to meet its short term obligations with its most liquid assets The quick ratio measures the dollar amount of liquid assets available for each dollar of current liabilities Thus a quick ratio of 1 5 means that a company has 1 50 of liquid assets available to cover each 1 of current liabilities Gross Profit Margin Gross Profit Net sales COGS Net Sales or operating revenues Gross Profit A financial metric used to assess a firm s financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold Net Profit Margin Net income Net Sales or operating revenues Net Profit Margin Measures how much of every sales dollar is profit Debt to Equity Total Liabilities Stockholders Equity Debt to Equity ratio indicates what proportion of equity and debt the company is using to finance its assets Return on Net income Preferred Dividends Equity Stockholder s Equity Return on Equity measures a corporation s profitability by revealing how much profit a company generates with the money shareholders have invested or the amount of net income returned as a percentage of shareholders equity Return On Assets ROA Net income Average total assets Return On Assets ROA An indicator of how profitable a company is relative to its total assets ROA gives an idea as to how efficient management is at using its assets to generate earnings Total Asset Turnover Net sales or operating revenues Average total assets Beginning Total Assets Ending Total Assets 2 Total Asset Turnover Measures how many sales dollar generated w each dollar of assets efficiency of use of assets Receivables Turnover Net sales Average Net trade receivables Receivables Turnover measures how many times average receivables are recorded and collected for the year Inventory Turnover Cost of Goods Sold Average Inventory Inventory Turnover reflects how many times average inventory was produced and sold during the period A higher ratio indicates that inventory moves more quickly thus reducing storage and obsolescence costs Earnings Per Share EPS Net income dividends on preferred stock Average of shares of common stock outstanding Earnings per Share The portion of a company s profit allocated to each outstanding share of common stock Earnings per share serves as an indicator of a company s profitability Price Earnings Ratio P E Market Value per Share EPS Price Earnings Ratio The portion of a company s profit allocated to each outstanding share of common stock Earnings per share serves as an indicator of a company s profitability Times Interest Earned Net income Interest expense Income tax expense Interest expense Times Interest Earned shows the amount of resources generated for each dollar of interest expense In general a high ratio is viewed more favorably than a low ratio Dividend Dividends Per Share Yield Ratio Market Price Per Share Dividend Yield Ratio This ratio is often used to compare the dividend paying performance of different investment alternatives
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