Financial Accounting Ratios

ruyewotu's version from 2017-05-09 15:36


Question Answer
Return on Shareholders equity (ROE)(Net income)/(Average shareholders equity) how much shareholders are getting (high)
Return on assets ratio (ROA)(Net income)/(Average total assets) revenue generated by assets (high)
Earnings per share EPS(Net Income)/(share capital or Average number of common shares outstanding) (high)
Quality of Earnings(Cash Flows from operating activities)/(net income) quality of earnings generated from operating activities (high)
Profit Margin(Profit)/(Net sales) profit after covering COGS (high)
Net Profit Margin(Net Income)/(Net Sales) Profit after covering all expenses (high)
Fixed Asset Turnover ratio(Net sales)/(Average total assets) How effective at managing its sales (high)
Financial Leverage Ratio(Avg. Total Assets)/(Avg. Shareholders' Equity) reliability on debt (lower)
Current ratio(current asset)/(current liabilities) assets help to pay liabilities (high)
Acid-test (quick) ratio(Current Assets-Inventory)/(current liabilities) current assets help to pay current liabilities (high)
Cash Ratio(Cash + Cash Equivalents)/(Current Liabilities) Cash helps the company pay the current liabilities (high)
Receivable Turnover(net credit sales)/(Average account receivables)
Inventory turnover(COGS)/(Average Inventory)
Payables Turnover(Net Credit Purchases)/(Average Net Trade Payables)
Debt to Equity Ratio(Total liabilities)/(Shareholders Equity) how much company financing by debt and liabilities (lower)
Cash Coverage(Cash flow from operations +interest pd. + taxes pd.)/(interest paid) cash from every $1 of interest expense (high)
Times interest earned(Net income + interest expense + tax expense)/(interest expense) enough income to cover interest expense (high)
Price to earnings P/E(Price per share)/(earnings per share) confidence to produce higher profits (high)
Dividend Yield Ratio(Dividend per share)/(Market price per share) (lower)
Book Value of Common Share(Total Owner's Equity)/(Common Shares outstanding) (higher)
COGSbeginning inventory + purchases - ending inventory
COG avail. for salepurchases + beg. inventory
Free Cash Flowcf from op act. - dividends - capital expenses