 LIQUIDITY RATIOS Age of Inventory + Age of  MARKET VALUE RATIOS / MARKET PROSPECT RATIOS

Normal Operating Cycle Receivables Market value ratios are anchored on Earnings per Share (EPS), which
is also considered a profitability ratio.
Normal Operating Cycle – Age of
RATIO FORMULA Cash Conversion Cycle Payables
Net Working Current Assets – Current Liabilities Net Income – Preferred Dividends .
EPS = Weighted Average Common Shares Outstanding
Capital
NOTE: ‘Age of Receivable’ is also known as Days Sales Outstanding,
Number of Days Sales in Receivable, or Days Receivable.
Current Ratio
Current Assets EPS must be distinguished from common shareholder’s Book
(Working
Current Liabilities Value per Share (BVPS), which is based on:
Capital Ratio)  SOLVENCY RATIOS / LEVERAGE RATIOS

Quick Ratio Quick Assets BVPS = Common Shareholders’ Equity ÷ Number of Common Shares
(Acid Test Ratio) Current Liabilities RATIO FORMULA Outstanding

Total Liabilities
Debt Ratio Total Assets
NOTE: Quick assets are cash items and other current assets that can be RATIO FORMULA
quickly converted into cash (i.e., cash, receivables, marketable securities). Total Equity Price-Earnings Market Price per Share
Equity Ratio Total Assets Ratio Earnings per Share
 ACTIVITY RATIOS / EFFICIENCY RATIOS / ASSET UTILIZATION RATIOS Dividend Per Share
Total Liabilities Dividends Yield
Debt-Equity Ratio Market Price per Share
Total Equity
RATIO FORMULA
Dividend Per Share
Inventory Turnover Cost of Goods Sold 1 . Dividend Payout
Equity Multiplier Earnings per Share
(for merchandisers) Average Inventory Equity Ratio
Retention Ratio
Net Credit Sales Times Interest Earned EBIT v (Plowback Ratio) 100% - Dividend Payout
Receivable Turnover Average Receivables (Interest Coverage Ratio) Interest Payments

Net Credit Purchases NOTE: Equity multiplier, a.k.a. equity ratio reciprocal, may be computed
Payable Turnover Average Payables  OTHER FINANCIAL RATIOS
based on formula: Assets ÷ Equity
Finished Good Turnover Cost of Goods Sold RATIO FORMULA
(for manufacturers) Ave. FG Inventory  PROFITABILITY RATIOS / PERFORMANCE RATIOS Cash_+ Marketable Securities
Cash Ratio Current Liabilities
Work-in-Process Turnover Cost of Goods Manu.
(for manufacturers) Ave. WIP Inventory RATIO FORMULA Quick Assets .
Defensive Interval Average Capital Expenditures
Raw Material Turnover Cost of Materials Used Gross Profit
Gross Profit Margin Sales
(for manufacturers) Ave. RM Inventory Operating Cash Flow (CF) .
Cash Flow Margin Net Sales
Inventory Turnover FG Turnover + WIP Turnover + RM Turnover EBIT
Operating Profit Margin Sales
(for manufacturers) Net Income After Tax
Times Preferred Dividends
Profit Earned Preferred Dividends
Age of Inventory (Inventory 360 days .
(Net) Profit Margin Sales
Conversion Period) Inventory Turnover Total Assets
Income Capital Intensity Ratio Net Sales
Age of Receivable 360 days
Return on Sales Sales
(Receivable Collection Receivables Turnover Operating CF + After-Tax Interest –
Period) Income. Free Cash Flow Capital Expenditures
Age of Payable 360 days Return on Assets Average
(Payable Deferral Period) Payables Turnover Assets
Sales . Income.
Asset Turnover Return on Equity AverageEquity
Average Total Assets

Sales .
Fixed Asset Turnover Average Fixed Assets
DU PONT TECHNIQUE:

Margin x Turnover = ROI ROS x ATO = ROA

Return on Equity = Return on Sales x Assets Turnover x Equity Multiplier