Ratios Used in Analysis of Financial Statements
Ratios Used in Analysis of Financial Statements
Ratios Used in Analysis of Financial Statements
Title Working Capital Current Ratio Formula Current assets Current Liabilities Current assets Current Liabilities Cash provided by operations Average current liabilities
Cost of goods sold Average inventory 365 days Inventory turnover ratio Net credit sales Average net receivables 365 days Receivables turnover ratio
Days in inventory
Note: Average means to add the beginning and the ending balances together and then divide by 2.
Solvency Ratios:
Title
Debt to total assets ratio
Formula
Total liabilities Total assets Cash provided by operations Average total liabilities Net income + Interest expense + Tax Expense Interest expense Cash provided Capital Cash by Operations Expenditures dividends
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Profitability Ratios:
Title Earnings per share Formula Net income Preferred stock dividends Average common shares outstanding Stock price per share Earnings per share Gross profit Net sales Net income Net sales Net income Average total assets Net sales Average total assets Cash dividends declared on common stock Net income Net income Preferred stock dividends Average common stockholders equity
Price-earnings ratio
Payout ratio
Note: If the corporation does not issue preferred stock than no preferred stock, dividend is declared.
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