Activity Ratios Ratio Formula Location Explanation Inventory Turnover Net SalesInventoryIncome StatementBalance sheetTo assess the efficiency

inthe management of InventoryDays Of Inventory (days)InventoryCOGS/36 5Balance sheetIncome StatementTo assess the efficiency inthe management of Inven tory Net Working CapitalTurnover Net Sales Net Working CapitalIncome StatementB alance sheet (CA-CL)To assess the effectively the Net Working Capital is usedto generate salesAsset Turnover SalesTotal AssetsIncome StatementBalance sheetTo as sess the amount of salesgenerated by each assetdollar Ratio Formula Location Explanation Net Profit Margin(%) Net profit After Taxes Net SalesIncome StatementIncome Sta tementIndicates the revenue required toearn a dollar profit after taxGross Profi t Margin(%)Sales Cost of Goods Sold Net SalesIncome StatementIncome StatementInd icates the profit available for non-manufacturing overheadReturn OnInvestment (% ) Net Profit After taxesTotal AssetsIncome StatementBalance sheetIndicates the e fficiency thatmanagement uses the companiesassetsEarnings per Share($)(Net Profi t After Tax Preferred stock Dividends)Average # Of CommonShares(IncomeStatementB.S)B.S. (sometimes)Indicates the after tax earningsfor the common stock shareho lders Fixed Asset Turnover SalesFixed AssetsIncome StatementBalance sheetTo assess the amount of salesgenerated by each fixed assetdollar Average Collection Period(da ys)Accounts ReceivableSales for Year/365Balance SheetIncome StatementTo assess t he efficiency inthe management/collection of Accounts receivableAccounts Receiva bleTurnover Annual Credit SalesAccounts ReceivableWork sheet &/or Sub.LedgersBal ance SheetTo assess the efficiency inthe management/collection of Accounts recei vableAccounts Payable Period Accounts Payable Purchases for year/365 Balance SheetWork sheetTo assess the efficiency inthe management/payment of A/P Ratio Formula Location Explanation Debt to Asset Ratio (%0Total DebtTotal assetsBalance SheetBalance SheetAssess th e amount of borrowedfunds used to finance companyassetsDebt to Equity Ratio (%)T otal DebtShareholder s EquityBalance SheetBalance SheetAssess the funds provided b ycreditors versus the funds byownersLong Term Debt toCapital Structure (%)L T deb tShareholder s EquityBalance SheetBalance SheetAssess the long-term component of t he capital structureTime Interest Earned(dec.)Profit pre tax + InterestChargesIn terest ChargesIncome StatementIncome StatementIndicates the ability of the compa nyto meet its annual interestCoverage of FixedCharges (dec.)Profit pre tax + Int erestCharges +LeaseChargesInterest Charges+Lease ChargesIncome StatementIncome S tatementAssess the company s ability tomeet all of its fixed expensesCurrent Liabi lities toequity (%)Current LiabilityShareholders EquityBalance SheetBalance Shee tAssess the short-term financing portion versus that provided byowners

Leverage Ratios Other Ratios Prepared ByP.Suthaharan Ratio Formula Location Explanation Price/Earnings Ratio(Dec.)Market price per ShareEarnings per shareStock Market R eportsIncome StatementAssess the amount investorsare willing to pay for eachdoll ar of earningsDividend PayoutRatio(%)Annual dividends per ShareAnnual Earnings p er ShareIncome StatementIncome StatementIndicates the percentage of profit that

is paid out asdividendsDividend Yield onCommon Stock (%)Annual dividends per Sh areCurrent Market price per shareIncome StatementStock MarketIndicates the divid end rate of return to commonshareholders at the currentmarket price