http://valuationacademy.com Financial Ratio Cheat Sheet — Valuation Academy

Financial Ratio Cheat Sheet

This is a summary of financial ratios commonly used in the evaluation of a company.

Liquidity ratios

1)      Current Ratio = Current Asset / Current Liability

2)      Quick Ratio = (Cash + Marketable securities + account receivables) / Current Liability

3)      Cash Ratio = (Cash + Marketable securities)/current Liability

4)      Cash flow from operations ratio =Cash Flow from Operations / Current Liability

5)      Receivable Turnover = net annual sales / average receivables

6)      Average Number of days receivables outstanding (Average Collection period) = 365/receivables turnover

7)      Inventory Turnover = Cost of goods sold (COGS) / average inventory

8)      Average Number of days in stock = 365/ Inventory turn over

9)      Payable Turnover = Annual Purchases / Average Payables

10)   Average Number of days payables outstanding (Average age of payables) = 365 / payable turnover

11)   Cash Conversion Cycle = Average collection period + average number of days in stock – average age of payables

 

Profitability Ratios

1)      Growth Profit Margin = gross profit / net sales

where gross profit = net sales – COGS

2)      Operating Profit Margin = Operating Income / net sales

where Operating Income = Earnings before tax and interest (EBIT)

3)      EBITDA margin = Earnings before interest, tax, depreciation and amortization / net sales

4)      Net Margin (Profit Margin) = net income / sales

5)      Contribution Margin = Contribution / sales

where contribution = sales – variable cost

 

Return on investment Ratios.

1)      Return on Assets (ROA) = EBIT /average total assets

2)      Return on common equity = (net income – preferred dividends)/average common equity

3)      Return on Total equity (ROE) = net income / average total equity

 

Operating Efficiency Ratios

1)      Total Asset turnover = net sales/average total assets

2)      Fixed asset turnover = net sales / average net fixed assets

3)      Equity turnover = net sales / average total equity

 

Financial Risk Ratios / Solvency Ratios

1)      Debt to Total Capital = total debt / total capital

2)      Debt to Equity = Total debt / total equity

3)      Financial leverage = average total assets / average total equity

4)      Interest Coverage Ratio =  EBIT / interest expense

5)      CFO to debt = Cash flow from operations / total debt

6)      Fixed charge coverage = earnings before fixed charges and taxes / fixed charges

 

Valuation ratios

1)      Price to earnings (P/E) ratio  = current market price of  the common stock / company earnings per share

2)      Earnings per share (EPS) = (net income – dividends on preferred stock) / weighted average number of shares outstanding

3)      Sustainable growth rate g = Retention rate * ROE

where retention rate = 1 – dividend declared /net income = 1 – dividend payout ratio