FMVA (CFI)
Study online at https://quizlet.com/_cmt0kf
1. Gross profit margin: shows how much is spent on producing the good or service that is sold for every
dollar of sales revenue. (Profitability ratio)
Gross Profit Margin = Gross Profit/Sales
2. Operating Profit Margin: ompares the operating income of a company to its net sales. It is an indication
of the eflciency of the operation
Operating Profit Margin = EBIT/Sales
3. Net profit margin: shows how much is earned for every dollar of sales revenue.
Net profit margin = Net income / Sales
4. Tax ratio: shows how well management manages tax. (Eflciency ratio)
Tax ratio = Tax expense / Pre-tax income
5. Interest Coverage Ratio: shows how much income is available to service debt costs. (Leverage ratio)
Interest coverage ratio = EBIT(DA) / Interest expenses
6. Current Ratio: measures the ability of a company to cover its obligations in the short term. (Liquidity ratio)
Current ratio = Current assets / Current liabilities
7. Quick ratio / acid test ratio: provides a more prudent measure of short-term liquidity recognizing that
the inventory cannot always be readily converted into cash. (Liquidity ratio)
Quick ratio = (Current assets - Inventory) / Current liabilities
8. Asset turnover ratio: hows how ettective the company is in generating sales from its assets. (Eflciency
ratio)
Asset turnover ratio = Sales / Total (or net) assets
9. Inventory turnover ratio: shows how quickly a company sells its inventory. (Eflciency ratio)
Inventory turnover ratio = Cost of sales / Inventory
10. Inventory days ratio: ndicates the average number of days goods remain in inventory before being sold.
(Eflciency ratio)
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, FMVA (CFI)
Study online at https://quizlet.com/_cmt0kf
Inventory days ratio = (Inventory x 365) / Cost of sales
11. Accounts receivable turnover ratio: measures how ettective the company's credit policies are.
(Eflciency ratio)
Accounts receivable turnover ratio = Sales / Accounts receivable
12. Accounts receivable days ratio: indicates the average number of days a firm takes to collect
payments on goods sold. (Eflciency ratio)
Accounts receivable days ratio = (Accounts receivable x 365) / Sales
13. Accounts payable turnover ratio: measures how ettective the company is in paying its suppliers.
(Eflciency ratio)
Accounts payable turnover ratio = Cost of sales / Accounts payable
14. Accounts payable days ratio: indicates the average number of days a firm takes to pay for items
purchased. (Eflciency ratio)
Accounts payable days ratio = (Accounts payable x 365) / Cost of sales
15. PP&E turnover ratio: measures the sales a company is able to generate from its capital assets. (Eflciency
ratio)
PP&E turnover ratio = Sales / PP&E
16. Debt to equity ratio: calculates the weight of total debt and financial liabilities against shareholder's
equity. (Leverage ratio)
Debt to equity = Interest bearing liabilities / Total shareholder's equity
17. Debt to tangible net worth ratio: measures how many physical assets a company has. It represents
the proceeds that could be available if the company were to be quickly sold. (Leverage ratio)
Debt to tangible net worth = Interest bearing liabilities / (Equity - Intangible assets)
18. Total liabilities to equity ratio: s used in conjunction with the debt to equity ratio to determine the
impact operational liabilities have on the funding of the business. (Leverage ratio)
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Study online at https://quizlet.com/_cmt0kf
1. Gross profit margin: shows how much is spent on producing the good or service that is sold for every
dollar of sales revenue. (Profitability ratio)
Gross Profit Margin = Gross Profit/Sales
2. Operating Profit Margin: ompares the operating income of a company to its net sales. It is an indication
of the eflciency of the operation
Operating Profit Margin = EBIT/Sales
3. Net profit margin: shows how much is earned for every dollar of sales revenue.
Net profit margin = Net income / Sales
4. Tax ratio: shows how well management manages tax. (Eflciency ratio)
Tax ratio = Tax expense / Pre-tax income
5. Interest Coverage Ratio: shows how much income is available to service debt costs. (Leverage ratio)
Interest coverage ratio = EBIT(DA) / Interest expenses
6. Current Ratio: measures the ability of a company to cover its obligations in the short term. (Liquidity ratio)
Current ratio = Current assets / Current liabilities
7. Quick ratio / acid test ratio: provides a more prudent measure of short-term liquidity recognizing that
the inventory cannot always be readily converted into cash. (Liquidity ratio)
Quick ratio = (Current assets - Inventory) / Current liabilities
8. Asset turnover ratio: hows how ettective the company is in generating sales from its assets. (Eflciency
ratio)
Asset turnover ratio = Sales / Total (or net) assets
9. Inventory turnover ratio: shows how quickly a company sells its inventory. (Eflciency ratio)
Inventory turnover ratio = Cost of sales / Inventory
10. Inventory days ratio: ndicates the average number of days goods remain in inventory before being sold.
(Eflciency ratio)
1/6
, FMVA (CFI)
Study online at https://quizlet.com/_cmt0kf
Inventory days ratio = (Inventory x 365) / Cost of sales
11. Accounts receivable turnover ratio: measures how ettective the company's credit policies are.
(Eflciency ratio)
Accounts receivable turnover ratio = Sales / Accounts receivable
12. Accounts receivable days ratio: indicates the average number of days a firm takes to collect
payments on goods sold. (Eflciency ratio)
Accounts receivable days ratio = (Accounts receivable x 365) / Sales
13. Accounts payable turnover ratio: measures how ettective the company is in paying its suppliers.
(Eflciency ratio)
Accounts payable turnover ratio = Cost of sales / Accounts payable
14. Accounts payable days ratio: indicates the average number of days a firm takes to pay for items
purchased. (Eflciency ratio)
Accounts payable days ratio = (Accounts payable x 365) / Cost of sales
15. PP&E turnover ratio: measures the sales a company is able to generate from its capital assets. (Eflciency
ratio)
PP&E turnover ratio = Sales / PP&E
16. Debt to equity ratio: calculates the weight of total debt and financial liabilities against shareholder's
equity. (Leverage ratio)
Debt to equity = Interest bearing liabilities / Total shareholder's equity
17. Debt to tangible net worth ratio: measures how many physical assets a company has. It represents
the proceeds that could be available if the company were to be quickly sold. (Leverage ratio)
Debt to tangible net worth = Interest bearing liabilities / (Equity - Intangible assets)
18. Total liabilities to equity ratio: s used in conjunction with the debt to equity ratio to determine the
impact operational liabilities have on the funding of the business. (Leverage ratio)
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