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Financial Formula


Submitted By Farjumzal
Words 343
Pages 2
Financial ratio formulas
Prepared by Pamela Peterson Drake


Operating cycle
Inventory Inventory = Average day's cost of goods sold Cost of goods sold / 365 Accounts receivable Accounts receivable = Average day's sales on credit Sales on credit / 365

Number of days of inventory =

Number of days of receivables =

Number of days of payables =

Accounts payable Accounts payable = Average day's purchases Purchases / 365
Note: Purchases =
Cost of Ending Beginning + + goods sold inventory inventory

Operating cycle =

Number of days Number of days + of inventory of receivables Number of days of inventory + Number of days Number of days − of receivables of purchases

Net operating cycle =


Current assets Current liabilitie s

Current ratio =

Quick ratio =

Current assets - Inventory Current liabilitie s Current assets - Current liabilitie s Sales

Net working capital to sales ratio =


Gross income Sales
Operating income Sales

Gross profit margin =

Operating profit margin =

Financial ratio formula sheet, prepared by Pamela Peterson-Drake


Net profit margin =

Net income Sales


Cost of goods sold Inventory
Sales on credit Accounts receivable

Inventory turnover =

Accounts receivable turnover =

Total asset turnover =

Sales Total assets Sales Fixed assets

Fixed asset turnover =


Financial leverage
Total debt Total assets Long - term debt Total assets

Total debt to assets ratio =

Long - term debt to assets ratio =

Total debt to equity ratio =

Total debt Total shareholders' equity

Equity multiplier =

Total assets Shareholders' equity
Earnings before interest and taxes Interest

Times - interest - coverage ratio =

Fixed - charge coverage ratio =

Earnings before interest and taxes + Lease payment Interest + Lease

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