Performance Ratios

Description

Formula

Source

Average Interest Rate

Indicates the average interest rate that a company borrows at.

(Interest Expense - Accounts Payable) / Total Liabilities

Balance Sheet and Income Statement

Book Value Per Share - BV

Somewhat similar to the earnings per share, but it relates the stockholder's equity to the number of shares outstanding, giving the shares a raw value.

(Total Shareholders Equity - Preferred Stock) / Shares Issued and Outstanding

Balance Sheet

Cash Flow to Assets

This ratio indicates the cash a company can generate in relation to its size

Net cash provided by operating activities / Total Assets

Balance Sheet and Statement of cash flow

Common Size Analysis

Indicates the proportion of an asset/liability/expense is as a function of total assets/liabilities/revenue

Entity / Total Entity

Balance Sheet,  Statement of cash flow and Income Statement

Dividend Payout Ratio

Indicates the proportion of earnings that are used to pay dividends to shareholders

Yearly Dividend per Share / Earnings per Share

Income Statement

Earnings Per Share - EPS

The most widely used ratio, it tells how much profit was generated on a per share basis

(Net Income - Dividends on Preferred Stock) / Shares Issued and Outstanding or Net Income / Shares Issued and Outstanding. The Shares Issued and Outstanding are also reported on balance sheet as capital stock

Balance Sheet and Income Statement

Gross Profit Margin

Indicates what the company's pricing policy is and what the true mark-up margins are

(Revenue - Cost of Goods Sold) / Revenue

Income Statement

Price to Earnings Ratio - P/E Ratio

One of the most widely used ratios, it compares the current price with earnings to see if a stock is over or under valued

Market Value per Share / Earnings per Share

Income Statement

Profit Margin

Indicates what portion of sales contribute to the income of a company

Net Income / Revenue

Income Statement

Return On Assets - ROA

Indicates what return a company is generating on the firm's investments/assets

(Net Income + Interest Expense) / Total Assets

Balance Sheet and Income Statement

Return On Equity - ROE

Indicates what return a company is generating on the owners' investment

Net Income / Total Shareholder's Equity

Balance Sheet and Income Statement

Activity Ratios

Description

Formula

Source

Asset Turnover

Indicates the relationship between assets and revenue

Revenues / Total Assets

Balance Sheet and Income Statement

Collection Ratio

This indicates the average number of days it takes a company to collect unpaid invoices

Accounts Receivable / (Revenue/365)

Balance Sheet and Income Statement

Inventory Turnover

An important and often overlooked ratio that indicates inventory levels

Cost of Goods Sold / Inventories Net

Balance Sheet and Income Statement

Financing Ratios

Description

Formula

Source

Debt-Asset Ratio

Indicates what proportion of the company's assets are being financed through debt

Total Liabilities  / Total Assets

Balance Sheet

Debt-Equity Ratio

Indicates what proportion of equity and debt that the company is using to finance its assets. Sometimes investors only use long term debt instead of total liabilities for a more stringent test

Total Liabilities  / Total Shareholders Equity

Balance Sheet

Liquidity Ratios

Description

Formula

Source

Acid Test (Quick Ratio)

A stringent test that indicates if a firm has enough short-term assets (without selling inventory) to cover its immediate liabilities. It is similar but a more strenuous version of the "working capital" ratio, indicating whether liabilities could be paid without selling inventory

(Cash + Accounts Receivable + Short-term Investments) / Current Liabilities

Balance Sheet

Interest Coverage

Indicates what portion of debt interest is covered by a company's cash flow situation

EBITDA / Interest Expense

Income Statement

Working Capital Ratio (Current Ratio)

Indicates if a firm has enough short-term assets to cover its immediate liabilities

Current Assets  / Current Liabilities

Balance Sheet