Key Financial ratios

• Quick Ratio = ( Current Assets−Inventory )/Current Liabilities

Similar to the current ratio but excludes inventory, providing a more stringent test of liquidity.

• Cash Ratio=Cash and Cash Equivalents/Current Liabilities

Evaluates the company's ability to pay off short-term liabilities with cash or near-cash securities.

financial metrics that measure how well a company uses its resources to generate income

• Inventory Turnover = Cost of Goods Sold/Average Inventory

Indicates how many times a company's inventory is sold and replaced over a period.

• Receivables Turnover

= Net Credit Sales/Average Accounts Receivable

Measures how effectively a company uses credit extended to customers.

• Asset Turnover = Net Sales/Total Assets

Shows how efficiently a company uses its assets to generate sales

• Gross Profit Margin=(Gross ProfitRevenue)×100

Indicates the percentage of revenue remaining after accounting for the costs of goods sold.

• Operating Margin=(Operating Income/Revenue)×100

Shows what proportion of revenue is left over after paying for variable costs of production like wages and raw materials.

• Net Profit Margin=(Net Profit/Revenue)×100

Measures how much profit the company makes for each dollar of sales

• ROA=Net Income/Total Assets

Indicates how profitable a company is relative to its total assets

• ROE=Net Income/Shareholder’s Equity

Measures profitability by revealing how much profit a company generates with the money shareholders have invested.

• Debt to Equity Ratio=Total Liabilities/Shareholder’s Equity

Shows the degree to which a company is financing its operations through debt versus wholly-owned funds.

• Interest Coverage Ratio=Earnings Before Interest and Taxes (EBIT)/Interest Expense

Assesses how well a company can meet its interest obligations.

• P/E Ratio=Market Price per Share/Earnings per Share (EPS)

Compares a company's current share price to its per-share earnings.

• P/B Ratio=Market Price per Share/Book Value per Share

Compares a stock's market value to its book value.

• Dividend Yield=(Annual Dividends per Share/Price per Share)×100

Shows how much a company pays out in dividends each year relative to its share price.

• Earnings Yield=Earnings per Share/Price per Share

The inverse of the P/E ratio, it shows the percentage of each dollar invested in the stock that was earned by the company.

• P/S Ratio=Market Capitalization/Total Sales or Revenue

Measures how much investors are willing to pay per dollar of sales.

• P/CF Ratio=Market Price per Share/Cash Flow per Share

Compares the company's market value to its cash flow, giving insight into how much investors are willing to pay for the cash generated by the company

• EV/EBITDA=Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization

Useful for comparing firms with different capital structures by incorporating debt and cash levels.

• Earnings Growth Rate = (Earnings in Current Year - Earnings in Previous Year) / Earnings in Previous Year )* 100

Measures the rate at which a company's earnings are increasing over time.

• Revenue Growth Rate=(Revenue in Current Year−Revenue in Previous Year/Revenue in Previous Year)×100

Indicates the growth in sales over a period.

• PEG Ratio=P/E Ratio/Annual EPS Growth Rate

This ratio modifies the P/E ratio by accounting for growth, providing a more nuanced view of stock valuation relative to earnings growth.

• Operating Cash Flow Ratio=Operating Cash Flow/Current Liabilities

Shows how well current liabilities are covered by the cash flow generated from operations.

• DSO={Accounts Receivable/Total Credit Sales }× Number of Days in Period

Measures the average number of days it takes a company to collect payment after a sale has been made.

• DIO=[Average Inventory/Cost of Goods Sold] × Number of Days in Period

Indicates how long it takes for inventory to turn into sales.

DPO=[Accounts Payable/Cost of Goods Sold]×Number of Days in Period

Shows how long a company takes to pay its suppliers.

• Equity Multiplier = Total Assets/Shareholder’s Equity

Indicates how much of the company's assets are financed by equity.

• Debt Ratio = Total Liabilities/Total Assets

Shows the proportion of a company's assets that are financed through debt.

TIE Ratio = EBIT/Interest Expense

Measures how many times a company can cover its interest charges on a pre-tax basis.

• Book Value per Share = Total Equity−Preferred Equity/Number of Common Shares Outstanding

Represents the per-share value of a company's equity, essentially what shareholders would theoretically receive if the company liquidated.

• Tangible Book Value per Share=Total Equity−Intangible Assets−Preferred Equity/Number of Common Shares Outstanding

Excludes intangible assets like patents or goodwill, giving a more conservative estimate of book value

Price to Tangible Book Ratio=Market Price per Share/Tangible Book Value per Share

Compares the market value of a company's shares to its tangible book value.

• ROCE=Earnings Before Interest and Tax (EBIT)/Capital Employed

Where Capital Employed = Total Assets - Current Liabilities (or Total Equity + Total Debt). This ratio indicates how efficiently a company is using its capital to generate profits.

• ROIC=Net Operating Profit After Taxes (NOPAT)Invested Capital

Invested Capital can be calculated as Total Debt + Total Equity. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business.

Return on Net Assets (RONA):RONA=Net Income/Fixed Assets + Working Capital

Focuses on the return generated from the company's net assets, excluding cash and investments

Capital Turnover Ratio=Net Sales/Total Capital Employed

Shows how effectively a company uses its capital to generate revenue.

EVA=Net Operating Profit After Tax (NOPAT)−(Capital Employed × Cost of Capital)

Measures the true economic profit of a company by deducting the cost of capital from the net operating profit after taxes. It's not a ratio but an absolute measure of value creation

ROACE = EBIT/Average Capital Employed

Similar to ROCE but uses an average capital employed over a period, which can smooth out fluctuations in capital investment.

NAV per Share=Total Assets−Total Liabilities/Number of Shares Outstanding

Represents the per-share value of a fund's or REIT's assets after accounting for liabilities.