calculating financial ratios
TRANSCRIPT
Calculating Financial Ratios
Lesson Goals:
• Learn ratio analysis• Calculate key ratios
Calculating Financial Ratios
Return on Investment (ROI)
Net Profit Before Taxes_________________________________________________________
Owner’s Equity
The proportion of sales that isrealized as the profit of the firm
Calculating Financial Ratios
Return on Sales (ROS)
Net Profit Before Taxes_________________________________________________________
Net Sales
The proportion of sales that isrealized as the profit of the firm
Calculating Financial Ratios
Debt to Asset Ratio
Total Liabilities_________________________________________________________
Total Assets
The proportion of assets that wouldhave to be liquidated to repay all debts
Calculating Financial Ratios
Current Ratio
Current Assets_________________________________________________________
Current Liabilities
Indicates the ability of the level of currentassets to be liquidated and
retire the firms current liabilities
Calculating Financial Ratios
Quick Ratio
Current Assets - Inventory_________________________________________________________
Current Liabilities
Defines whether the level currentassets minus inventory is sufficient
to retire current liabilities
Calculating Financial Ratios
Average Collection Period
Credit Sales_________________________________________________________
Accounts Receivable
Demonstrates the number of timesin a period that accounts receivable turn over
Calculating Financial Ratios
Inventory Turnover Rate
Cost of Goods Sold_________________________________________________________
Average Inventory
Demonstrates the number oftimes in a period that inventory turns over
Calculating Financial Ratios
Cash Turnover Rate
Net Sales_________________________________________________________
Current Assets – Current Liabilities
The proportion of sales that isrealized as the profit of the firm
Calculating Financial Ratios
Sales Per Square Foot
Net Sales_________________________________________________________
Square Footage of Selling Space
Indicates the level of sales per squarefoot of selling space
Calculating Financial Ratios
Sales Per Hour
Net Sales_________________________________________________________
Number of Working Hours in Period
Indicates the level of sales per numberof employee working hours in the period
Calculating Financial Ratios
Sales Per Employee
Net Sales_________________________________________________________
Number of Full-time Equivalent Employees
Indicates the level of sales per numberof full-time employee equivalents
Calculating Financial Ratios
Sales to Total Assets
Net Sales_________________________________________________________
Total Assets
Indicates the level of sales per dollarof assets invested in the business
Calculating Financial Ratios
Ratio Analysis Process
1. Calculate ratios2. Maintain records of your ratios over
time3. Compare your ratios against similar
businesses4. Determine where adjustment is
needed and develop action strategies5. Measure results
Calculating Financial Ratios