This page lists the most important financial ratios when analyzing financial statements, namely the Balance Sheet, and Income Statement.

## Income Statement Ratios

### Gross Profit Ratio

G

Expressed as percentageross Profit Ratio = Gross Profit/Total Revenue

Show’s the proportion of profits prior to SG&A.

### Operating Profit Ratio

Operating Profit Ratio = Operating Income

Expressed as percentage/Total Revenue

Show’s how much the company makes after paying for variable costs of production such as wages, raw materials, and others.

### Net Profit Ratio

Net Profit Ratio = Net Income

Expressed as percentage/Total Revenue

Show’s how much net profit is generated as a percentage of net revenue.

### Tax Ratio

Tax Ratio = Income Tax

Expressed as percentage/Income Before Tax

### Interest Coverage Ratio

Interest Coverage Ratio = Interest Expense

Expressed as number with one decimal/Operating Income

### SG&A Ratio

SG&A Ratio = Selling/General/Administrative Expenses

Expressed as percentage/Total Revenue

### R&D Ratio

R&D Ratio = Research & Development

Expressed as percentage/Total Revenue

### Dep. & Amort. Ratio

Dep. & Amort = Depreciation/Amortization

Expressed as percentage/Total Revenue

### Unusual Expenses Ratio

Unusual Expense Ratio = Unusual Expenses (Income)

Expressed as percentage/Total Revenue

### Other Ratio

Other Ratio = Other Operating Expenses

Expressed as percentage/Total Revenue

### Interest Ratio

Interest Ratio = Interest Expense

Expressed as percentage/Total Revenue

### Extraordinary Items Ratio

Extraordinary Items Ratio = Extraordinary Items

Expressed as percentage/Total Revenue

## Balance Sheet Ratios

### Quick Ratio (Acid Test Ratio)

Quick Ratio = (Total Current Assets

Expressed as number with one decimal–Inventories)/Total Current Liabilities

A ratio to determine the short-term liquidity without calculating the inventories (as these might take time to sell, or can’t be sold for the full value).

A general good ratio is 1:1 but it depends on the industry.

### Current Ratio

Current Ratio = Total Current Assets

Expressed as number with one decimal/Total Current Liabilities

A ratio to determine the short-term liquidity. It takes into account:

- Accounts receivable
- Inventory
- Cash
- Prepaid expenses

A general good ratio is 2:1 but it depends on the industry.

### Total Asset Turnover Ratio

Total Asset Turnover Ratio = Total Revenue

Expressed as number with one decimal/Total Current Assets

This ratio shows:

- How efficient the company is using it’s assets to generate revenue.
- How much revenue does the company generate for each 1 dollar of assets?

### Net Asset Turnover Ratio

Net Asset Turnover Ratio = Total Revenue

Expressed as number with one decimal/(Total Assets–Current Liabilities)

This ratio shows (without counting current liabilities, as paid off within a year):

- How efficient the company is using it’s assets to generate revenue.
- How much revenue does the company generate for each 1 dollar of assets?

## Efficiency Ratios

### Inventory Turnover Ratio

Inventory Turnover Ratio = Cost of Revenue

Expressed as number with one decimal/Inventories

### Inventory Days

Inventory Days = (Inventories * 365)

Expressed as number with one decimal/Cost of Revenue

### Accounts Receivable Ratio

Accounts Receivable Ratio = Total Revenue

Expressed as number with one decimal/Accounts Receivable

### Accounts Receivable Days

Accounts Receivable Days = (Accounts Receivable

Expressed as number with one decimal*365)/Total Revenue

### Accounts Payable Ratio

Accounts Payable Ratio = Cost of Revenue

Expressed as number with one decimal/Accounts payable

### Accounts Payable Days

Accounts Payable Days = (Accounts Payable

Expressed as number with one decimal*365)/Cost of Revenue

### PP&E Turnover Ratio

PP&E Turnover Ratio = Total Revenue

Expressed as number with one decimal/Property, plant and equipment

### Working Capital Turnover

Working Capital Turnover = Total Revenue

Expressed as number with one decimal/((Accounts Receivable+Inventories)–Accounts Payable)

### Cash Turnover

Cash Turnover = Total Revenue

Expressed as number with one decimal/Cash

## Leverage & Solvency Ratios

### Debt to Equity

Debt to Equity = Debt

Expressed as a percentage/Shareholder’s Equity

If the ratio is higher than 100% then more funding comes from debt, rather than equity.

### Debt to Capital

Debt to Capital = Debt

Expressed as a percentage/(Debt + Shareholder’s Equity)

If the ratio is higher than 100% then more funding comes from debt, rather than equity.

### Debt to Tangible Net Worth

Debt to Tangible Net Worth = Debt

Expressed as a percentage/(Shareholder’s Equity–Goodwill and intangible assets)

A ratio of 1 would be best, but if it’s greater than 1, then it is necessary to check how the company is managing its financing.

### Total Liabilities to Equity

Total Liabilities to Equity = Total Liabilities

Expressed as a percentage/Shareholder’s Equity

Determines together with the debt to equity ratio, the impact of the operational liabilities on the business.

### Total Assets to Equity

Total Assets to Equity = Total Assets

Expressed as a percentage/Shareholder’s Equity

If the ratio is low, the company might not be sufficiently leveraged. The higher the value, the higher leveraged, the company is.

### Debt to EBITDA

Debt to EBITDA = Debt

Expressed as a percentage/(Operating Income+Depreciation/Amortization)

Assess the amount of leverage in relation to EBITDA. Depending on industry this can range from 1 to 5 times.

### Capital Structure Impact

Capital Structure Impact = Income Before Tax

Expressed as a percentage/Operating Income

### Acid Test

Acid Test = (Total Current Assets

Expressed as a percentage–Inventories)/Total Current liabilities

## Rates of Return

### Return on Equity

Return on Equity = Net Income

Expressed as a percentage/Shareholder’s Equity

### Return on Assets

Return on Assets = Net Income

Expressed as a percentage/Total Assets