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Financial Ratio Formulas

Financial Ratio Formulas - Ratio What the ratios tells us...

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Ratio What the ratios tells us Formula Expression PROFITABILITY Vertical Analysis What proportion of sales did each item on the SOE account for? What percentage of sales was spent? What percentage was kept? Statement of Earnings Item Sales % Return on Equity (Return on Investment) Measure of earnings relative to investment made with shareholder, owner and/or company funds. Increased earnings are the desired proceeds from invested funds. Earnings Total Equity % STABILITY Net Worth to Total Assets Proportion of assets financed by shareholder, owner and/or company funds (equity). Total Equity Total Assets % Debt to Equity Measures the proportion of debt and equity used to finance assets. Compared to each dollar of equity, how many dollars of debt has the company taken on? Total Debt (liabilities) Total Equity % Interest Coverage Determines how many times the interest expense could be paid given the company’s earnings. Compares profit levels to the amount of interest owed.
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