Calculating Financial Ratios. Lesson Goals: Learn ratio analysis Calculate key ratios Calculating Financial Ratios.

Calculating Financial Ratios

Lesson Goals:

• Learn ratio analysis• Calculate key ratios


Return on Investment (ROI)

Net Profit Before Taxes_________________________________________________________

Owner’s Equity

The proportion of sales that is

realized as the profit of the firm


Return on Sales (ROS)

Net Profit Before Taxes_________________________________________________________

Net Sales

The proportion of sales that is

realized as the profit of the firm


Debt to Asset Ratio

Total Liabilities_________________________________________________________

Total Assets

The proportion of assets that wouldhave to be liquidated to repay all debts


Current Ratio

Current Assets_________________________________________________________

Current Liabilities

Indicates the ability of the level of currentassets to be liquidated and

retire the firms current liabilities


Quick Ratio

Current Assets - Inventory_________________________________________________________

Current Liabilities

Defines whether the level currentassets minus inventory is sufficient

to retire current liabilities


Average Collection Period

Credit Sales_________________________________________________________

Accounts Receivable

Demonstrates the number of timesin a period that accounts receivable turn over


Inventory Turnover Rate

Cost of Goods Sold_________________________________________________________

Average Inventory

Demonstrates the number oftimes in a period that inventory turns over


Cash Turnover Rate

Net Sales_________________________________________________________

Current Assets – Current Liabilities

The proportion of sales that isrealized as the profit of the firm


Sales Per Square Foot

Net Sales_________________________________________________________

Square Footage of Selling Space

Indicates the level of sales per squarefoot of selling space


Sales Per Hour

Net Sales_________________________________________________________

Number of Working Hours in Period

Indicates the level of sales per numberof employee working hours in the period


Sales Per Employee

Net Sales_________________________________________________________

Number of Full-time Equivalent Employees

Indicates the level of sales per numberof full-time employee equivalents


Sales to Total Assets

Net Sales_________________________________________________________

Total Assets

Indicates the level of sales per dollarof assets invested in the business


Ratio Analysis Process

1. Calculate ratios

2. Maintain records of your ratios over time

3. Compare your ratios against similar businesses

4. Determine where adjustment is needed and develop action strategies

5. Measure results


Calculating Financial Ratios. Lesson Goals: Learn ratio analysis Calculate key ratios Calculating Financial Ratios.

Documents

level of sales

financial ratiosslide

employeenet sales

hournet sales

sales rosnet profit

equitythe proportion

level of current assets

level current assets