Common Financial Ratios

I. Short-term solvency, or liquidity, ratios

Current assets

Current ratio = Quick ratio = Cash ratio =

Current liabilities Current assets - Inventory Current liabilities Cash

Current liabilities

Interval measure =

Current assets

Average daily operating costs

II. Long-term solvency, or financial leverage, ratios t * . -j u* Total assets - Total equity

Total assets

Debt-equity ratio = Total debt/Total equity

Equity multiplier = Total assets/Total equity

Net working capital to total assets = Net working capital

Total assets

Times interest earned ratio =

Long-term debt + Total equity EBIT

Cash coverage ratio =

Interest EBIT + Depreciation Interest

III. Asset utilization, or turnover, ratios


365 days

Days' sales in inventory = Receivables turnover =

Inventory turnover Sales

Days' sales in receivables =

Accounts receivable 365 days

Receivables turnover

NWC turnover =


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