Tag: Ratio Formula

quality of earnings ratio formula

Quality of Earnings Ratio

The quality of income ratio or earnings quality ratio can be used to indicate that the net income of a business demonstrates high quality characteristics such as, for example, being cash backed, predictable, recurring and conservative.

Last modified January 17th, 2020 by Michael Brown
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cash flow ratios calculator v 1.0

Cash Flow Ratios Calculator

This cash ratios calculator uses operating cash flow instead of net income to calculate three financial ratios. Unlike net income, cash flow is an objective measure of performance which cannot be manipulated or distorted using accounting assumptions and opinions.

Last modified July 16th, 2019 by Michael Brown
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cash flow ratio

Cash Flow Ratio Analysis

Cash flow ratios can be calculated using cash flow from operating activities found in the cash flow statement of a business. Using cash flow avoids the use of net income which is a subjective measure traditionally used in the calculation of accounting ratios.

Last modified January 9th, 2023 by Michael Brown
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days sales outstanding

Days Sales Outstanding

The days sales outstanding shows the average number of days your customers are taking to pay you. It is calculated by dividing average accounts receivables by the daily credit sales.

Last modified November 28th, 2022 by Michael Brown
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operating leverage

Operating Leverage Ratio Analysis

The operating leverage shows the level of fixed cost leverage within a business, and the degree of operating leverage shows the impact of the cost structure on the operating income of the business.

The operating income for a business with high leverage can change dramatically for a given change in the number of units sold, and its earnings are said to be more volatile and therefore more risky

Last modified January 27th, 2023 by Michael Brown
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return on assets

Return on Assets ROA

Return on assets or ROA measures the percentage rate of return a business gets on its assets. It is calculated by dividing the earnings before interest and tax by the total assets of the business.

Last modified September 27th, 2022 by Michael Brown
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ROCE – Return on Capital Employed

ROCE or return on capital employed measures the percentage rate of return a business gets on its capital employed. It is calculated by dividing the earnings before interest and tax by the total assets less current liabilities of the business.

Last modified May 26th, 2023 by Michael Brown
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inventory days formula

Inventory Days

The Inventory Days ratio shows the average number of days sales a business is holding in its inventory. It is calculated by dividing inventory by average daily cost of goods sold. It is sometimes called the Stock Days ratio.

Last modified October 13th, 2022 by Michael Brown
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net profit ratio formula

Net Profit Ratio

The net profit ratio is the profit after tax of the business expressed as a percentage of the revenue. It is calculated by dividing profit after tax by revenue.
The Net profit ratio is also called Net Margin or Net Profit Margin.

Last modified October 18th, 2022 by Michael Brown
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return on sales formula

Return on Sales

The return on sales is the operating income of the business expressed as a percentage of the revenue. It is a measure of the level of true income a business generates on its sales. It is calculated by dividing operating income by revenue. Operating income is the same as earnings before interest and tax (EBIT), otherwise called profit before interest and tax (PBIT).

Last modified November 18th, 2022 by Michael Brown
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interest coverage ratio formula

Interest Coverage Ratio

The interest coverage ratio measures the amount of earnings a business has to make interest payments. It is calculated by dividing the profit before interest and tax by the interest expense. It is sometimes called the interest cover ratio or simply interest coverage or interest cover.

Last modified January 30th, 2023 by Michael Brown
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