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Financial Stability/Liquidity Ratios: Ratio Formula Indicate

The document defines and provides formulas for various financial ratios used to analyze a company's financial stability, liquidity, profitability, and investment returns. The ratios are grouped into categories including current ratio, debt-equity ratio, return on total assets, earnings per share, and dividend payout, among others. The formulas use data from a company's balance sheet and income statement to calculate metrics such as short-term debt paying ability, borrowing levels, profit margins, and returns on shareholder equity.

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William Lattao
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Download as DOCX, PDF, TXT or read online on Scribd
38 views

Financial Stability/Liquidity Ratios: Ratio Formula Indicate

The document defines and provides formulas for various financial ratios used to analyze a company's financial stability, liquidity, profitability, and investment returns. The ratios are grouped into categories including current ratio, debt-equity ratio, return on total assets, earnings per share, and dividend payout, among others. The formulas use data from a company's balance sheet and income statement to calculate metrics such as short-term debt paying ability, borrowing levels, profit margins, and returns on shareholder equity.

Uploaded by

William Lattao
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FINANCIAL STABILITY/LIQUIDITY RATIOS

Ratio Formula Indicate


Current ratio Current Assets Short-term debt paying ability
Current Liabilities

Acid-test ratio Quick Assets Immediate short-term liquidity


Current Liabilities

Debt-equity ratio Total Liabilities Level of borrowing relative to


Total Owners’ Equity funds used to finance the
company
Receivables turnover Net Credit Sales Liquidity of Receivables
Average Receivables
Inventory turnover Cost Sales Liquidity of Inventory
Average Merchandise Inventory

Payables turnover Net Credit Purchase Efficiency of payment to creditors


Average Trade Payables

Current Assets turnover Net Sales Effectiveness in the use of current


Average Current Assets assets

Fixed Assets turnover Net Sales Effectiveness in the use of fixed


Average Fixed Assets assets

Assets turnover Net Sales Efficiency in the use of assets to


Average Total Assets generate sales

PROFITABILITY RATIOS

Return on total assets Net income before interest & taxes Overall profitability of assets
Average Total assets

Operating expense ratio Operating Expenses Cost incurred to support each


Net Sales peso of sales

Gross profit ratio Gross Profit Margin between selling price and
Net Sales cost of goods sold

Net profit ratio Net Profit Net income generated by each


Net Sales peso of sales
INVESTMENT RATIOS

Earnings per share Net Income – Preferred dividends Net income earned on each
Weighted average no. of common ordinary share
shares

Return on owners’ equity Net Income Profitability of shareholders’


Average Owners’ Equity investments

Price-earnings ratio Price per Share How much an investor would pay
Earnings per Share for each peso of current earnings

Dividend yield Dividend per Share Return on stock investments


Price per Share based on the market value of the
shares

Dividend payout Common divided per share Portion of available profits


Earnings per share distributed to common
shareholders as dividend

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