POINTS TO REMEMBER
- What are the different types of financial ratios?
- Liquidity ratios
- Profitability ratios
- Ownership ratios
- What are the different liquidity ratios?
- Current ratio = current asset/current liabilities
- Quick ratio = (current asset - inventory)/current liabilities
- Receivables turnover ratio = Annual credit sales/receivables
- Inventory turnover ratio = Cost of goods sold/inventory
- Name the profitability ratios.
- Profit margin = operating profit/sales
- Return on investment = (operating profit/sales) x (sales/assets)
- Return on equity = Net earnings/total equity
- Earning power ratio = Net earnings/assets
- Name the ownership ratios.
- Earning per share = Net profit for equity-holders/No. of outstanding equity shares
- Price/earning ratio ...
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