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Basic Financial Ratios
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Flashcards
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Operating Margin Ratio
Measures the proportion of a company's revenue that is left over after paying for variable costs of production. Formula:
Return on Equity (ROE)
Measures the profitability of a corporation in relation to shareholders' equity. Formula:
Current Ratio
Measures a company's ability to pay short-term obligations. Formula:
Times Interest Earned Ratio
Also known as Interest Coverage Ratio, determines how easily a company can pay interest on its outstanding debt. Formula:
Price-Earnings Ratio (P/E)
Evaluates the price of a company's stock relative to its earnings. Formula:
Dividend Yield
Shows how much a company pays out in dividends each year relative to its stock price. Formula:
Inventory Turnover Ratio
Shows how many times a company's inventory is sold and replaced over a period. Formula:
Debt Ratio
Indicates the proportion of a company's asset that is financed by debt. Formula:
Interest Coverage Ratio
Determines how easily a company can pay interest on outstanding debt. Formula:
Net Profit Margin
Represents how much net income is generated as a percentage of revenues. Formula:
Return on Assets (ROA)
Indicates how efficiently a company utilizes its assets to produce earnings. Formula:
Working Capital
Refers to the difference between a company’s current assets and current liabilities. Formula:
Debt to Equity Ratio
Indicates the relative proportion of shareholders' equity and debt used to finance a company's assets. Formula:
Gross Margin Ratio
Indicates the percentage of revenue that exceeds the cost of goods sold (COGS). Formula:
Earnings Per Share (EPS)
Represents the portion of a company's profit allocated to each outstanding share of common stock. Formula:
Asset Turnover Ratio
Measures a company's ability to generate sales from its assets. Formula:
Quick Ratio
Measures a company's ability to pay short-term obligations with its most liquid assets. Formula:
Profit Margin
Indicates how much profit a company makes for every dollar it generates in revenue. Formula:
Receivables Turnover Ratio
Measures how efficiently a company extends credit and collects debts on that credit. Formula:
Cash Conversion Cycle (CCC)
Measures how quickly a company can convert its investments in inventory into cash flows from sales. Formula:
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