Chapter 4 Formulas - Chapter 4 Formulas 5 TYPES OF RAT IOS...

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Chapter 4 Formulas: 5 TYPES OF RATIOS: 1) Liquidity: a. Current Ratio : current assets/current liabilities b. Quick (or Acid-Test) Ratio : (current assets – inventories)/current liabilities 2) Asset Management Ratios: a. Inventory Turnover Ratio : sales/inventory b. Days Sales Outstanding (DSO) or Average Collections Period (ACP) : accounts receivables/average sales per day or accounts receivables/(annual sales/365) c. Fixed Assets Turnover Ratio : Sales/Net fixed assets d. Total Assets Turnover Ratio : Sales/Total assets 3) Debt Management Ratios: a. Debt Ratio : Total debt (liability)/Total assets b. Times-Interest-Earned (TIE) Ratio : EBIT/Interest Expense(charges) 4) Profitability: a. Operating Margin : Operating income (EBIT)/Sales b. Profit Margin : Net income/Sales c. Basic Earning Power (BEP) Ratio : EBIT/Total assets d. Return on Total Assets (ROA) : Net income/Total assets e. Return on Common Equity (ROE) : Net income/Common equity
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5) Market Value Ratios:
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