Financial Ratios/Equations

Equations


1. Return on Assets = Net Income/Total Assets

2. Return on Stockholders Equity = Net Income/(Assets – Liabilites)

3. Asset Turnover Ratio = Total Revenue/Total Assets

4. Profit Margin (Return on Sales) = Net Income/Total Revenue

5. Gross Margin = Total Revenue (Sales) – Cost of Goods Sold – Gross Margin Percentage = Gross Margin/Total Revenue (Sales)

6. Net Income = Total Revenue – Total Operating Expenses

7. Total Equity = Total Assets – Total Liabilities

8. Return on Equity = Net Income/Shareholder’s Equity

9. Current Ratio = Current Assets/Current Liabilities

10. Current Assets

  • Cash and Cash Equivalents
  • Accounts Receivable
  • Inventory
  • Marketable Securities
  • Prepaid Expenses, etc. Learn More->

11. Current Liabilities

  • Short Term Debt
  • Accounts Payable
  • Accrued Liabilities, etc. Learn More->

12. Earnings Per Share = (Net Income – Dividends on Preferred Stock)/Average Outstanding Shares

13. Quick ratio (Acid Test) = (current assets – inventories) / current liabilities, or  = (cash and equivalents + marketable securities + accounts receivable) / current liabilities

14. Return on Investment = (Gain from Investment – Cost of Investment)/Cost of Investment

15. Debt to Equity Ratio =

  1. Total Liabilities / Shareholders’ Equity
  2. Total Liabilities / (Total Assets – Total Liabilities)

16. Return on Sales (Profit Margin) = Net Income (Before Interest and Tax)/Sales

17. Working Capital = Current Assets – Current Liabilities