Profitability Ratios 

  • gross margin = (gross profit / revenue) x 100

  • operating margin (OM) = (operating income / revenue) x 100

  • net margin = (net profit / revenue) x 100


Liquidity Ratios

  • current ratio (CR) = current assets / current liabilities

  • quick ratio = (current assets – inventories) / current liabilities

  • cash ratio = cash / current liabilities

  • times interest earned (TIE) = EBIT / interest expense


Operating Ratios

  • return on total assets (ROA) = (net income / total assets) x 100

  • return on common equity (ROE) = (net income / common equity) x 100 

  • DuPont Equation = (net income / sales) x (sales / total assets) x (total assets /book value of equity)

  • days sales outstanding (DSO) = accounts receivable / average sales per day

  • fixed asset turnover = net sales / net fixed assets

  • total asset turnover = net sales revenue / total assets


Working Capital Ratios

  • accounts receivable days = (AR / revenue) x 365

  • accounts payable days = (AP / COGS) x 365

  • inventory days = inventory / COGS) x 365

  • inventory turnover = COGS / inventory

  • basic earning power (BEP) = EBIT (earnings before interest and taxes)/total assets


Interest Coverage Ratios

  • EBIT Interest Coverage = EBIT / interest expense

  • EBITDA Interest Coverage = EBITDA / interest expense


Leverage Ratios

  • debt to equity = total liabilities / total equity

  • debt to assets = total liabilities / total assets

  • debt to capital = total liabilities / (total debt + shareholder’s equity)

  • times interest earned (TIE) = Earnings Before Interest & Taxes / Interest Expense


Valuation Ratios

  • Enterprise value = market capitalization + debt - cash

  • economic value added (EVA) = market value of equity + long term debt - cash

  • market value added (MVA) = market value of the firm – invested capital


Market Value Ratios

  • price/earnings = market price per share / earnings per share

  • market to book = market capitalization / total book value


Time Value of Money

  • present value (PV) = Future Value / (1+r)N [r = interest rate; N = number of years]

  • future value (FV) = Present Value (1+r)N  [r = interest rate; N = number of years]

  • net present value (NPV) = investment amount – PV of future cash flows


Other Financial Calculations

  • breakeven point in units (BEP) = total fixed costs / contribution margin per unit


  • breakeven point in dollars (BEP) = fixed costs / contribution margin ratio


  • rate of return = ( (current value – investment) / investment ) x 100


  • weighted average cost of capital (WACC) = percent of debt x ((cost of debt (1-tax rate)) + (percent of equity x cost of equity)


  • capital asset pricing model (CAPM) = expected return on a security = 

risk-free rate + (beta of the security x (expected return of the market – risk-free rate)


  • free cash flow (FCF) = net operating profit after taxes – net working capital


  • accounting equation: Assets = Liabilities + Owners’ Equity


  • additional funds needed (AFN) = 

projected increase in assets – spontaneous increase in liabilities – increases in retained earning