Common Financial & Accounting Ratios & Formulas Cheat Sheet
Introduction
Accounting ratios are widely used tools of financial analysis. If p roperly analyzed, they help identify areas on the financial statem ent needing further
analysis.
A ratio is a mathematical relation between two quantities ex pressed as a percentage, a rate or proportion.
Short Term Solvency or Liquidity Ratios
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Cash Ratio = Cash / Current Liabilities
Net Working Capital = Net Working Capital / Total Assets
Internal Measure = Current Assets / Average Daily Operating Costs
Percentage of Debt to Asset Formula = Long Term Liabilities ⁄ Total Assets x 100%
Debt to Equity Ratio Formula = Total Liabilities ⁄ Tota l Equity
Long Term Solvency or Financial Leverage Ratios
Total Debt Ratio = (Total Assets – Total Equity) / Total Assets
Debt to Equity Ratio = Total Debt / Total Equity
Equity Multiplier = Total Assets / Total Equity
Long Term Debt Ratio = Long Term Debt / (Long Term Debt + Total Equity )
Times Interest Earned = Earnings before Interest & Taxes / Interest
Cash Coverage Ratio = (Earnings before Interest & Taxes + Depreciat ion) / Interest
Asset Use or Turnover Ratios
Inventory Turnover = Cost of Goods So ld / Inventory
Days’ Sales in Inventory = 365 days / Inventory Turnover
Receivables Turnover = Sales / Accounts Receivable
Days’ Sales in Receivables = 365 days / Receivables Turnover
Net Working Capital (NWC) Turnover = Sales / Net Working Ca pital
Fixed Asset Turnover = Sales / N et Fixed Assets
Total Asset Turnover = Sales / Total Assets
Profitability Ratios
Profit Margin = Net Income / Sales
Return on Assets (ROA) = Net Income / Total Assets
Return on Equity (ROE) = Net Income / Total Equity
ROE = (Net Income / Sales) x (Sales / Assets) x (Assets / Equity)
Market Value Ratios
Price to Earnings Ratio = Price per Share / E arnings per Share
Market-to-Book Ratio = Market Valu e per Share / Book Value per Share
Cash Flow Ratios
Cash Flow Solvency Ratio Formula = Actual Cash Flow from Operations ⁄ Total Liabilities
Cash Flow Margin Ratio Formula = Actual Cash Flow from O perations ⁄ Revenues from Sales
Cash flow ROA Ratio Formula = Actual Cash Flow from Operations ⁄ Average Total A ssets
