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• Inventory Turnover:
Cost of Goods Sold ÷ Inventory
Measures how many times a company’s inventory is sold and replaced over a period.
• Asset Turnover:
Sales ÷ Total Assets
Measures a firm’s efficiency at using its assets in generating sales or revenue.
• Current Ratio:
Current Assets ÷ Current Liabilities
Measures a company’s ability to pay short-term obligations.
• Quick Ratio:
(Current Assets – Inventory) ÷ Current
Another liquidity ratio, but excludes inventory as it is less liquid.
• Interest Coverage Ratio:
EBIT ÷ Interest Expenses
Measures how easily a company can pay interest expenses on outstanding debt.
• Return on Assets (ROA):
Net Income ÷ Total Assets
Measures how efficiently a company uses its assets to generate income.
• Return on Equity (ROE):
Net Income ÷ Shareholder’s Equity
Measures how efficiently a company uses its equity to generate income.
• Gross Margin:
Gross Profit ÷ Revenue
Measures how much out of every dollar of sales a company keeps as gross profit.
• Net Profit Margin:
Net Income ÷ Revenue
Measures how much out of every dollar of sales a company keeps as earnings.
• Dividend Payout Ratio:
Dividends ÷ Net Income
Measures what proportion of earnings are paid to shareholders as dividends.
• Dividend Yield:
Annual Dividends per Share ÷ Price per Share
Shows how much a company returns in dividends each year relative to its share price.
• Debt to Equity Ratio:
Total Debt ÷ Total Equity
A leverage ratio that compares a company’s total debt with its total equity.
📈 Market Value Ratios
• Earnings Per Share (EPS):
Net Income ÷ Shares Outstanding
Measures the profit allocated to each share of common stock.
• Price to Earnings Ratio (P/E):
Share Price ÷ Earnings per Share
Measures the price you pay for each dollar of earnings.
• Price to Sales (P/S):
Share Price ÷ Sales Per Share
Compares a company’s market value to its sales.
Investors use earnings before interest, taxes, and amortisation (EBITA) as a gauge of a company’s profitability. Comparing one business to another in the same industry might be useful. It occasionally can also offer a more realistic assessment of a company’s worth.
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