product line or company. The adjusted gross margin includes the cost of carrying inventory, whereas the (unadjusted) gross margin calculation does not take this into consideration. Net Profit Margin (%) Net profit margin is the percentage of revenue left after all expenses have been deducted
from sales. The measurement reveals the amount of profit that a business can extract from its total sales. The net sales part of the equation is gross sales minus all sales deductions, such as sales allowances. Adjusted Net Profit Margin (%) Adjusted net income or adjusted earnings , represents the best estimate of what that true profit is. Adjusted net profit margin , then, is the "true" margin when you figure the company's adjusted profit as a percentage of revenue. Return on Assets Excluding Revaluations/ Return on Assets Including Revaluations Return on total assets (ROTA) is a ratio that measures a company's earnings before interest and taxes (EBIT) relative to its total net assets . ... The ratio is considered to be an indicator of how effectively a company is using its assets to generate earnings. Return on Long Term Funds (%) Estimated long - term return is a metric that provides investors with a return estimate they can expect when investing in a fund over a long - term timeframe. Overall, estimated long - term return disclosure can be a marketing measure easily quoted by fixed income funds that can increase marketability. 3. Liquidity And Solvency Ratios Liquidity And Solvency Ratios Current Ratio 0.41 0.35 0.47 Quick Ratio 0.25 0.21 0.31 Debt Equity Ratio 0.31 0.35 0.38 Long Term Debt Equity Ratio 0.26 0.27 0.32 Liquidity ratios measure a company's ability to convert its assets into cash. ... The solvency ratio includes financial obligations in both the long and short term, whereas liquidity ratios focus more on a company's short-term debt obligations and current assets.
Current ratio The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better. Current ratio = current Assets/current liabilities Quick Ratio The quick ratio is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position.
- Fall '19
- Generally Accepted Accounting Principles, key financial ratios, Reliance Industries Ltd