Links
Compare Business Ratios Spreadsheet = https://bit.ly/3flCOuf
Performance Ratios
Profitability Ratios: These ratios offer insight into how profitable a company is. Some important profitability ratios include gross profit ratio, return on equity, break-even point, return on equity, and return on net assets. ( Return on Assets = Net Income/Average Total Assets )
Liquidity Ratios: Liquidity ratios offer insight into how liquid a company is, which is important in measuring a company’s ability to stay in business. Some important liquidity ratios include cash coverage ratio, current ratio, and liquidity index. ( Quick Ratio = Current Assets minus Inventory over Current Liabilities ) (Cash Ratio = Total Cash + short term investments over Current Liabilities )
Leverage Ratios: Leverage ratios offer insight into how much a company is dependent on debt to maintain its operations. Some important leverage ratios include debt to equity ratio, debt service coverage ratio, and fixed charge coverage.
Activity Ratios: Activity ratios offer insight into how well a company is utilizing resources. Some important activity ratios include accounts payable turnover rate, accounts receivable turnover rate, inventory turnover rate, and working capital turnover rate.
Other Ratios
Payroll to Revenue Ratio = Labor Costs over Net Sales
Sales - Employee Cost Ratio = gross sales by # employees x 100 (s/b 20-30% )
( all wages, salaries, bonuses, commissions, payroll taxes & employee benefits )
Professional Links
