Inventory Turnover
Inventory Turnover=Cost of goods sold/Average Inventory
Debt to equity ratio
Total liabilities/total debt
Net Profit Margin
Net Income after tax/Net Sales
Return of Equity Ratio
(net income-preferred dividends)/average total equity
Return on Asset
=Net Income/Average Total Asset Or
=Net Profit Margin*Total Asset Turnover
Net Income/Sales * Net Sales/Average Total Asset
What does Quick Ratio Measure?
Quick Ratio measures the company’s ability to pay short term obligation with its most liquid asset such as cash marketable securities and net receivable.
Accounts recievable turnover ratio
Accounts recievable turnover ratio=net sales/average accounts receivable
Days in inventory
Days in inventory is defined as ending inventory / (Cost of goods sold / 365).
Equity multiplier
The equity multiplier measures financial leverage and shows how much of a company’s assets are financed by equity.
\textbf{Equity Multiplier} = \frac{\text{Total Assets}}{\text{Total Equity}}
• Higher equity multiplier → more leverage (more debt financing)
• Lower equity multiplier → less leverage (more equity financing)
Total debt ratio
The total debt ratio shows what percentage of total assets are financed by creditors by dividing total liabilities by total assets.
Times interest earned
before interest expense and taxes
Or
Earnings before interest and taxes
Interest expense
Interest expense
Asset turnover ratio
Asset turnover is calculated as net sales divided by average total assets:
Different ratios what it measure
Asset turnover ratio indicates operational efficient in relations to sales.
Current ratio short term liquidity.
Debt to equity ratio financial leverage .
Gross profit margin operational profitability.
