Accounting Ratios

Some of the ratios are: Current ratio, debt/ equity ratio, total outside liabilities/ tangible net worth

Basically ratios are 4 types

1.  Liquidity Ratios.

a) Current ratio              Current assets /  Current Liabilities

b) Acid test ratio             Quick assets   /  Current Liabilities

c) Bank Finance- Working

    Capital Gap ratio           Short-term Bank Borrowing / working capital Gap

2.  Leverage Ratio

a) Debt-Equity ratio         Debt  / equity

b)  Debt-Asset ratio         Debt / assets

c)  Interest Coverage ratio  EBIT / Interest

3.  Turnover Ratio

a) Inventory - Turnover ratio   Net sales / Inventory

b) Average collection period     Receivables / Average sales per day

c) Receivables - Turnover ratio   Net sales / Receivables

d) Fixed asset - Turnover Ratio    Net sales / Fixed assets

e) Total assets - Turnover Ratio    Net sales / Total assets

4.  Profitability Ratio

a)  Gross profit margin ratio         Gross profit / Net sales

b)  Net profit margin ratio               Net profit / net sales

c)  Net income to Total asset ratio   Net profit / total assets

d)  Return on Investment                  EBIT /Total assets

e)  Return on Equity                           Equity Earnings / Net Worth