Intermediate Midterm 1 ch. 3 Review

Measures of profitability

Gross profit (margin) %
Net income percentage
Return on equity
Return on assets

Measures of solvency

Debt to assets percentage
Interest coverage ratio

Measures of liquidity

Current ratio
Quick ratio
Accounts receivable turnover
Accounts receivable days
Inventory turnover
Inventory days
Trade payables turnover
Trade payables days

Gross profit (margin) %

Gross profit/sales

Net income percentage

Net income/sales

Return on equity

Net income/average stockholders equity

Return on assets

Operating income/ Average total assetes
(Operating income=Gross profit - SGA Exepenses + other operating income)
OR
Asset turnover x Operating income percentage

Asset turnover

Sales/Average total assets

Operating income %

Operating income/sales

Debt to assets percentage

Total liabilities/total assets

Interest coverage ratio

EBITD/Interest expense

Current ratio

Current assets/current liabilities

Quick ratio

Financial assets/current liabilities
(Financial assets= cash + marketable securities (short term investments) + receivables)

Accounts receivable turnover

Sales/average accounts receivable

Account receivable days

365 days/accounts receivable turnover

Inventory turnover

Cost of goods sold/Average inventory

Inventory days

365 days/inventory turnover

Trade payables turnover

Ending inventory + CGS - Beginning inventory= Inventory purchases
Inventory purchases/Average trade payables

Trade payable days

365/Trade payable turnover