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