Financial Ratio & Formulas

Activity Ratios:

ReceivablesTurnover= Annual SalesAverage Receivables

Daysof sales outstanding= 365Receivables Turnover

Inventory Turnover=Cost of goods soldaverage inventory

Daysof inventory onhand= 365inventory turnover

PayablesTurnover= PurchasesAveragetrades payable

No .of daysof payables= 356payablesturnover ratio

Total asset turnover= RevenueAverage totalassets

¿asset Turnover= RevenueAverage net ¿

asset ¿

Working capitalTurnover= RevenueAverageworking capital

Liquidity Ratio:

Current Ratio= Current AssetCurrent Liabilities

Quick Ratio=Cash+Marketable securities+ReceivablesCurrent Liabilities

Cash Ratio=Cash+Marketable SecuritiesCurrent Liabilities

Defensive Internal=Cash+Marketable securities+ReceivablesAverage daily expenditure

CashConversionCycle=( Daily SalesOut standing)+(Daysof inventoryonhand )−(Number of daysof payable )

Solvency Ratios:

Debt−¿−Equity= Total Debt

Total Shareholder ' s Equity

Debt−¿−Capital= Total Debt

Total Debt+Total Shareholde r ' s Equity

Debt−¿−Asset= Total DebtTotal Assets

Financial Leverage= AverageTotal AssetsAverageTotal Equity

Interest Coverage=Earnings before interets∧taxesInterest Payments

¿ChargeCoverage= Earnings before interest∧taxes+Lease PaymentsInterest Payments+Lease Payments

Profitability Ratios

Net Profit Margin= Net IncomeRevenue

Gros s Profit Margin=Gross ProfitRevenue

Operating Profit Margin=Operating IncomeRevenue

∨ EBITRevenue

PretaxMargin= EBTRevenue

Returno n Asset (ROA )= Net IncomeAverageTotal Assets

Returnon Asset (ROA )=Net Income+ Interest expense (1−tax rate )AverageTotal Assets

Operating Returnon Assets= Operating IncomeAverageTotal Assets

∨ EBITAveragetotal Assets

ReturnonTotal Capital= EBITAverageTotal Capital

Returnon Equity= Net IncomeAverage Total Equity

Returnon Equity= Net Income−Preferred DevidendAverageCommonEquity

=Net Incomeavailable ¿Common ¿AverageCommonEquity

Free Cash Flow to Firm:

FCFF=Net Income+Noncashcharge+ [Interest expense× (1−Tax rate ) ]−¿Capital Investment−WorkingCapital Investment

FCFF=Cash Flow ¿Operations+[ Interest expense× (1−Tax rate ) ]−¿Capital Investmen t

Free Cash Flow from Equity:

FCFE=CashFlow ¿Operations−¿Capital Investment+Net Borrowing

Common−¿ncome Statement Ratios= IncomeStatement AccountSales

Common−¿ alance Sheet Ratios=Balance Sheet AccountTotal Assets

Original DuPont Equation :ROE=(Net Pro fitMargin )( AssetTurnover)(LeverageRatio )

Extended DuPont Equation :

ROE=( Net IncomeEBT )( EBTEBIT )( EBITRevenue )( Revenue

Total Assets )( Total AssetsTotal Equity )

Basic EPF= Net Income−Preferred DividendsWeightedaverage no .of common sharesoutstanding

Diluted EPS=

(Net Income−PrefferedDividend )+(ConvertiblePreferreddividend )+(ConvertibleDebt

Interest ) (1−t )

(WeightedAverageShares )+(Shares¿ ¿Conversionof ¿Conv . pfd .Shares ¿)+(Shares¿ ¿Conversion of ¿Conv . Debt¿)+( Sharesissuable

¿¿StockOption¿)

Coefficients of Variation:

CV Sales= Standard Deviationof SalesMean Sales

CV Operating Income=Standard Deviationof operating IncomeMeanOperating Income

CV of Net Income=Standard Deviationof net incomeMean Net Income

Inventories:

Ending Inventory=Beginning Inventory+Purchases−COGS

Current Cost of Inventory (FIFO )=LIFO Inventory+LIFO reserve

COGSFIFO=COGSLIFO−(Ending LIFOreserve−beginning LIFO reserve)

Long-Lived Assets:

Straight−LineDepreciation=Cost−SalvageValueUseful Life

DDBDepreciation=( 2Useful Life ) (Cost−Accumulated Depreciation )

Average Age∈Years= Accumulated DepreciationAnnual Depreciation Expence

Averageage asa Percentage= AccumulatedDepreciationEndingGross Investment

AverageDepreciable Life= EndingGross InvestmentAnnual Dep reciation Expense

RemainingUseful Life= Ending Net InvestmentAnnual Depreciation Expense

Deferred Taxes:

IncomeTax Expense=Taxes Payable+∆ DTL−∆ DTA

Debt Liabilities

Interes Expense=(the Market Rateat Issue )×( theBalance Sheet valueof the Liability at

the beginningof thePeriod)Performance Ratios

Ca sh flow−¿−Revenue= CFONet Revenue

Cash return−on−Asset= CFOAverageTotal Assets

Cash return−on−Equity= CFOAverageTotal Equity

Cash−¿−Income= CFOOperating Income

Cash flow per Share= CFO−Preferrence DividendsWeighted average no .of CommonShares

Coverage Ratios

Debt Coverage= CFOTotal Debt

Interest Coverage=CFO+ Interest Paid+TaxesPaidInterest Paid

Reinvestment= CFOCash Paid for LongTerm Assets

Debt Repayment= CFOCash for LongtermDebt Repayment

Dividend Payments= CFODividends Paid

Investing∧Financing= CFOCashOutflows ¿

Investing∧Financing Activities ¿