Financial Ratios PDF

Financial Ratio analysis expresses the relationship among selected items of financial statement data. The relationship is expressed in terms of a percentage, a rate, or a simple proportion (Weygandtet.al. 2013). A financial ratio is composed of a numerator and a denominator. These ratios are general...

Financial Ratio analysis expresses the relationship among selected items of financial statement data. The relationship is expressed in terms of a percentage, a rate, or a simple proportion (Weygandtet.al. 2013). A financial ratio is composed of a numerator and a denominator. These ratios are generally grouped into three categories: **[Profitability ratios]** measure the ability of the company to generate income from the use of its assets and invested capital as well as control its cost. The following are the commonly used profitability ratios: **RATIOS FORMULA** Gross Profit Ratio [Net Sales-Cost of Goods Sold] Operating Income Ratio [Operating Income] Net Profit Ratio [Net Income] Return on assets [Net Income] Return on Equity [Net Income] **[Operational efficiency ratio]** measures the ability of the company to utilize its assets. Operational efficiency is measured based on the company's ability to generate sales from the utilization of its assets, as a whole or individually. The turnover ratios are primarily used to measure operational efficiency. **RATIOS FORMULA** Asset Turnover [Net Sales] Fixed Asset Turnover [Net Sales] Inventory Turnover [Cost of Goods Sold] Accounts Receivable Turnover [Net Sales] **RATIOS FORMULA** Equity Ratio [Total Equity] Debt Ratio [Total Debt] Debt to Equity Ratios [Total Debt] Interest Coverage Ratio [Operating Income] Current Ratio [Current Assets] Quick Ratio [Quick Assets]