Management Finance Assignment

Commonly Used Financial Ratios

Dr. Harris

Growth Rates:

One Year Growth Rate (End Value – Begin Value) / Begin Value = Growth Rate

Report as % Example: 5.67%

Compound Annual (Ending Value/Beginning Value) 1/N – 1 = CAGR

Growth Rate

(Use for Multiple Years) Report as % Example 4.75%

Profitability Ratios:

Gross Margin (Sales – Cost of Goods Sold) ÷ (Sales) = GM

Report as % Example 15.75%

Operating Margin (Profits Before Interest and Taxes) ÷ (Sales) = OM

Report as % Example 11.67%

Return on Sales (Net Income) ÷ (Sales) = ROS

Report as % Example 6.45%

Return on Assets (Net Income) ÷ (Total Assets) = ROA

Report as % Example 4.45%

Return on Equity (Net Income) ÷ (Total Shareholder’s Equity) = ROE

Report as % Example 3.45%

Earnings per Share (Net Income) ÷ (# of Common Shares Outstanding) = EPS

Report as $ / Share Example $1.07 / Share

Liquidity Ratios:

Current Ratio (Current Assets) ÷ (Current Liabilities) = Current

Report as Ratio Example 2.13

Quick Ratio (Current Assets – Inventory) ÷ (Current Liabilities) = Quick

Report as Ratio Example 1.87

Leverage Ratios:

Debt to Assets Ratio (Total Debt) ÷ (Total Assets) = D/A

Report as % Example 45.89%

Debt to Equity Ratio (Total Debt) ÷ (Total Shareholder’s Equity) = D/E

Report as % Example 143.29%

Activity Ratios:

Fixed Asset Turnover (Sales) ÷ (Property, Plant & Equipment, Net) = FAT

Report as Ratio Example 3.57

Total Asset Turnover (Sales) ÷ (Total Assets) = TAT

Report as Ratio Example 23.84

Inventory Turnover (Cost of Goods Sold) ÷ (Inventory) = Inventory Turn

Report as Ratio Example 28.34

Valuation Ratio:

Price/Earnings Ratio (Market Price per Share) ÷ (Earnings per Share) = P/E Ratio

Report as Ratio Example 12.34