COMMONLY USED

FINANCIAL RATIOS
 Liquidity Ratios
Ratio Formulas Indicators
1. Current ratio Total current assets Indicates the ability to
Total current liabilities pay currently maturing
obligations

2. Acid-test ratio Total quick assets Indicates the ability to

Total current liabilities pay current liabilities by
the use of quick assets;
Quick assets = cash + more stringent
MES + trade measures of liquidity.
receivables

3. Receivable turnover Net credit sales Indicates the efficiency

Average trade receivable of collection of
receivables
4. Collection period 360 Indicates the quickness
Receivable turnover in collecting trade
receivables measures
the liquidity of
receivables
 Ratio Formulas Indicators
5. Inventory turnover Cost of goods sold Indicates the efficiency
Average inventory of acquiring and selling
inventory; the number
of times are acquired
and sold during the year

6. Inventory sales 360 days Indicates the number of

period Inventory turnover days to sell inventory

7. Payable turnover Net credit purchases Indicates the efficiency

Average trade receivable of meeting trade
payables

8. Payable payment 360 days Indicates the number of

days Payable turnover days before payment of
trade payables
 o Ratio
9. Operating turnover
Formulas
Collection period
Indicators
Indicates the number of
+ days cash is invested
inventory days until the day of its
recovery

10. Cash turnover Cash-operating expenses Indicates the ability to

Average cash balance pay operating expenses
given certain cash
balance

11. Days to operating 360 days Indicates the number of

expenses Cash turnover days required paying
operating expenses
12. Working capital Net sales Indicates the adequacy
turnover Average working of working capital
 Ratio Formula Indicators

13. Raw materials Raw materials used Indicates the number of

turnover Average raw materials times raw materials are
inventory used and replenished

14. Work- in process Cost of goods Indicates the number of

turnover manufactured times work-in-process
Average work-in-process
inventory
inventories are
converted to finished
products

15.Finished goods Cost of goods sold Indicates the number of

turnover Average finished times finished good is
sold

16. Asset turnover Net sales Indicates the

Average total assets effectiveness of
utilizing company’s
resources
 Ratio Formula Indicators

17. Current assets Net sales – depreciation- amortization Indicates the adequacy
Average current sales
turnover of current resources to
meet operating
Alternative formula requirements
Cost of sales + operating
expenses + income taxes +
other expenses (excluding
depreciation and
amortization
Average current assets

18. Net working Indicates the amount of

capital Current assets minus investment to operate
current liabilities normally
II. Solvency Or Leverage
Ratios
Ratios Formulas Indicators

1. Debt ratio Total liabilities Indicates the

Total assets percentage of all
assets being financed
with debt

2. Debt-to- Total liabilities Indicates the portion

equity ratio Total shareholders equity of debt in relation to
resources provided by
owners

3.Equity ratio Total shareholders equity Indicates the

Total assets proportion of assets
provided by owners
 Ratios Formulas Indicators

4. Time interest Net income before Indicates the

Earned interest and taxes number of times
Interest expense interest is covered
by operating income
5. Fixed assets to Fixed assets (net) Indicates the
non- current debts Total non current liabilities percentage of
investment in fixed
assets finance from
non-clinical debt
6. Fixed assets to Fixed assets ( net) Indicates the
stockholders’ equity Shareholder’s equity percentage of
investment in fixed
assets by
shareholders
7. Fixed assets to Fixed assets Indicates the
total equity Total assets percentage of
investment in fixed
assets
III. Profitability ratios
Ratios Formulas Indicators
1. Gross profit rate Gross Profit Indicate the income
Net Sales after deducting cost of
sales
2. Operating profit Operating Profit Indicates the amount of
margin Net Sales profit after deducting
operating expenses
from gross profit
3. Net profit margin Net profit Indicates the amount of
Net sales profit after deducting
all expenses
4. Return on Operating income Indicates the rate of
investment Average total assets return of every peso
investment
If there is interest-bearing
debt, return on investment is
computed as follows:

Net income+ interest

expenses(1-tax rate)
Average total assets
5. Return on SHE Net Income Indicates the
Average SHE percentage of income
for every peso of SHE.
6. Return on Total Net Income + interest Indicates the overall
assets expense net of tax profitability and the
effectiveness of
utilization of assets
7. Return on current Net Income Indicates the
assets Average current assets profitability of current
assets invested
 Growth ratios
Ratios Formulas Indicators
1. Basic earnings per Earnings avail. to ord. shareholders
Ave, Ordinary shares outstanding
Indicates the peso
share return on each and
ordinary shares
2. Diluted earnings per Adjusted earnings avail. to Indicates the earnings
ord. shareholders
share potentials per share by
Ave, Ordinary shares including ordinary
outstanding shares equivalents.
3. Price-earnings ratio MV/share of O/S Indicates the value of
Earnings per share ordinary shares in
relation to the market
price
4. Dividend payout Dividend per share Indicates the
ratio Earnings per share percentage of earnings
payment to
shareholders
5. Dividend- yield ratio Dividend per share Indicates the
MV/share of o/s relationship between
div and market value of
ordinary shares
6. Dividend per share Dividend paid Indicates the income
Ordinary shares distributed to the
outstanding shareholders
7. BV per share Shareholders’ Equity Indicates the value of
Average shares share in the event of
outstanding liquidation