Financial Ratio Formulas
ADVERTISEMENT
1
2
3Financial ratio formulas
Prepared by Pamela Peterson Drake
1.
Operating cycle
Inventory
Inventory
Number of days of inventory
=
=
Average day's cost of goods sold
Cost of goods sold / 365
Accounts receivable
Accounts receivable
Number of days of receivables
=
=
Average day's sales on credit
Sales on credit / 365
Accounts payable
Accounts payable
Number of days of payables
=
=
Average day's purchases
Purchases / 365
Cost of
Ending
Beginning
Note:
Purchases =
+
+
goods sold inventory
inventory
Number of days Number of days
Operating cycle
=
+
of inventory
of receivables
Number
of
days
Number
of
days
Number
of
days
=
+
−
Net
operating
cycle
of
inventory
of
receivable
s
of
purchases
2.
Liquidity
Current
assets
=
Current
ratio
Current
liabilitie
s
Current
assets
-
Inventory
Quick
ratio
=
Current
liabilitie
s
Current
assets
-
Current
liabilitie
s
Net
working
capital
to
sales
ratio
=
Sales
3.
Profitability
Gross income
Gross profit margin
=
Sales
Operating income
Operating profit margin =
Sales
Financial ratio formula sheet, prepared by Pamela Peterson-Drake
1
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Business