Ratio 

Unit

Formula 

How to Interpret

Cash Ratio 

None 

Cash & Equivalents / Current Liabilities 

This is a measure of liquidity, highlighting the ability of a business to pay off its short-term debt with cash and other assets that can be easily converted to cash. The figure expresses the dollar value of cash and cash equivalents for each dollar of current liabilities. 

Inventory Turnover 

None 

Cost of Sales / Inventory 

This ratio indicates the average liquidity of the inventory or whether a business has over or under stocked inventory. This ratio is not very relevant for financial, construction and real estate industries.

Payables Turnover 

None 

Cost of Sales / Trade Creditors 

This figure expresses the number of times during the year a company is able to pay off its suppliers, and is therefore a measure of short-term liquidity.

Current Ratio 

None 

Current Assets / Current Liabilities 

This ratio is a rough indication of a firm’s ability to service its current obligations. Generally, the higher the current ratio, the greater the “cushion” between current obligations and a firm’s ability to pay them. While a stronger ratio shows that the numbers for current assets exceed those for current liabilities, the composition and quality of current assets are critical factors in the analysis of an individual firm’s liquidity.

Days’ Inventory 

None 

365 / Inventory Turnover 

This figure expresses the average time in days it takes for a firm to sell its inventory.

Day’s Payables 

None 

365 / Payables Turnover 

This figure expresses the average time in days it takes for a firm to pay its accounts payable. Generally, the greater number of days outstanding the greater the probability of delinquencies in accounts payable. A comparison of this ratio may indicate the extent of a company’s control over its ability to meet short-term cash obligations. However, companies within the same industry may have different terms offered by their creditors, which must be considered. 

Days’ Receivables 

None 

365 / Trade Receivables Turnover 

This figure expresses the average number of days that receivables are outstanding. Generally, the greater the number of days outstanding, the greater the probability of delinquencies in accounts receivable. A comparison of this ratio may indicate the extent of a company’s control over credit and collections. However, companies within the same industry may have different terms offered to customers, which must be considered.

Quick Ratio 

None 

(Current Assets - Inventory) / Current Liabilities 

This figure expresses the dollar amount of cash or other liquid assets on hand for each dollar of current liabilities. A figure of $1 or above should be aimed for.

Trade Receivables Turnover 

None 

Net Sales / Trade Debtors 

This ratio measures the number of times trade receivables turn over during the year. The higher the turnover of receivables, the shorter the time between sale and cash collection.

Working Capital Turnover 

None 

Net Sales / (Current Assets - Current Liabilities) 

Working capital reflects a business’s ability to finance current operations, thus being a measure of the margin of protection for current creditors. When you relate the level of sales resulting from operations to the underlying working capital, you can measure how efficiently working capital is being used. 

Cash Flow Coverage Ratio 

None 

Operating Cash Flow / Total Debt 

This figure expresses how much of an industry's debt can be repaid in a year. It measures how long it takes a firm to pay down total debt using all cash flow in the industry.

Cash Flow Margin Ratio 

None 

Operating Cash Flow / Net Sales 

This measures the dollar amount of cash flowing into the business for each dollar of sales. There is no benchmark figure, though a higher ratio is generally better. An increasing trend in this ratio is also a sign that the company’s operating efficiency is improving. 

Current Liability Coverage Ratio 

None 

Operating Cash Flow / Current Liabilities 

This figure expresses the dollar value of cash flow for each dollar of current liabilities. A figure of less than 1:1 means that industry is not able to cover its current liabilities through its cash flow.

EBIT

$ million 

Total Income - Cost of Sales - Operating Expenses

This figure expresses earnings before interest and taxes (EBIT). It is a common measure of profitability, and generally considered a more conservative measure of profit compared to EBITDA because it includes depreciation and amortisation expenses, providing a more realistic view of a company's operational profitability.

Interest Coverage 

None 

EBIT / Interest Expenses 

This ratio calculates the average number of times that interest owing is earned and, therefore, indicates the debt risk of a business. The larger the ratio, the more able a firm is to cover its interest obligations on debt. A figure above 1.5 is ideal. This ratio is not very relevant for financial industries. This ratio is also known as "times interest earned.”

Debt / Net Worth 

None 

Total Debt / Net Worth 

This figure expresses how much debt a company owes as a share of its net value or worth. Net worth is the sum of total assets minus total liabilities. The greater the value, the higher the percentage of assets a company has to use to cover its debts.

Fixed Assets / Net Worth 

None 

Fixed Assets / Net Worth 

This figure expresses the dollar value of fixed assets for each dollar of net worth. A smaller ratio is indicative of a greater ability to meet long-term debts.

Net Worth Ratio 

None 

EBIT / Net Worth 

This ratio expresses the rate of return on tangible capital employed. While it can serve as an indicator of management performance, you should always use it in conjunction with other ratios. Normally associated with effective management, a high return could actually point to an undercapitalised firm. Conversely, a low return that’s usually viewed as an indicator of inefficient management performance could actually reflect a highly capitalised, conservatively operated business.

Expense / Income Ratio 

None 

Total Expenses / Total Income 

This figure expresses the dollar amount of expenses for each dollar of income and is a measure of operational efficiency. This is a particularly important ratio for finance industries.  

Gross Profit Margin  

% 

((Total Income - Cost of Sales) / Total Income) * 100 

This percentage expresses the share of revenue left over after accounting for the cost of production. While a rising or fluctuating gross profit margin could be due to external factors it could also indicate of a firm’s inability to control costs. 

Mark Up

% 

((Net Sales - Cost of Sales) / Cost of Sales) * 100 

This percentage expresses the average premium charged for goods or services. This is a measure of profitability.  

Net Profit

% 

((Total Income - Total Expenses) / Total Income) * 100 

This percentage is a simple expression of the profitability of a business or industry. 

Return on Net Worth

% 

(Total Profit or Loss / Net Worth) * 100 

This percentage reflects profitability, specifically how well a business is using its assets to make a profit. The higher the figure, the more value it is getting out of its assets. 

Return on Total Assets

% 

(EBIT / Total Assets) * 100 

This figure, also referred to as "return on total investment," is a relative measure of profitability and represents the rate of return earned on the investment of total assets by a business. It reflects the combined effect of both the operating and the financing/investing activities of a business. A higher percentage indicates better profitability.

Fixed Asset Turnover 

None 

Net Sales / Fixed Assets 

This figure expresses how many times revenue generated by a company covers the value of fixed assets. Generally, a higher fixed asset turnover is an indication of greater efficiency. However, a low fixed asset turnover could be due to less depreciation as a result of newer assets. 

Asset Turnover 

None 

Net Sales / Total Assets 

This figure expresses the dollar value of sales made for each dollar of assets. The higher the value of sales, the more efficiently a firm is generating revenue from its assets.

Operating Cashflow

$ million 

NA

This figure expresses how much cash is generated from core business activities.

Cash & Equivalents

$ million 

NA

This figure expresses the total value of assets that are cash or can be immediately converted into cash and is a measure of liquidity.

Cash & Equivalents

% 

(Cash & Equivalents / Total Assets) * 100 

This percentage represents all cash or cash equivalent assets as a share of total assets.

Fixed Assets

% 

(Fixed Assets / Total Assets) * 100 

This percentage expresses fixed assets as a share of total assets. This is a measure of a firm’s capital intensity. 

Fixed Assets

$ million 

 NA

This figure expresses the value of property, plant, and equipment used in operations and generation of revenue.

Inventory

% 

(Inventory / Total Assets) * 100 

This percentage represents tangible assets held for sale in the ordinary course of business, or goods in the process of production for such sale, or materials to be consumed in the production of goods and services for sale. It excludes assets held for rental purposes.

Total Assets  

$ million 

 NA

The sum of the value of all assets, which includes the value of current and noncurrent assets.

Total Current Assets

% 

(Current Assets / Total Assets) * 100 

This percentage represents the total of cash and other resources that are expected to be realised in cash, or sold or consumed within one year, or within the normal operating cycle of the business, whichever is longer.

Trade Receivables

% 

(Trade Debtors / Total Assets) * 100 

This percentage represents all claims against debtors arising from the sale of goods and services and any other miscellaneous claims with respect to non-trade transaction. It excludes loan receivables and some receivables from related parties. 

Long Term Debt

% 

((Total Liabilities - Current Liabilities) / Total Assets) * 100 

This percentage represents obligations that are not reasonably expected to be liquidated within the normal operating cycle of the business but, instead, are payable at some date beyond that time.

Net Worth

$ million 

 NA

This a representation of the value of a company or industry as it deducts the cost of all short- and long-term obligations from the total assets. A rising trend in net worth is a sign of a healthy business model. 

Short Term Debt

% 

(Short Term Debt / Total Assets) * 100 

This figure represents the percentage of total assets that are financed by short-term debt.

Total Current Liabilities

% 

(Total Current Liabilities / Total Assets) * 100 

This percentage represents obligations that are expected to be paid within one year, or within the normal operating cycle, whichever is longer. Current liabilities are generally paid out of current assets or through creation of other current liabilities. Examples of such liabilities include accounts payable, advances from customers, etc.

Trade Payables

% 

(Trade Creditors / Total Liabilities & Net Worth) * 100 

This financial metric helps in assessing the company’s reliance on trade credit in relation to its overall financial position. A higher percentage indicates that a larger portion of the total obligations and net worth is made up of trade creditors. This could suggest a reliance on trade credit for financing operations, which might be a concern if it is too high, indicating potential liquidity risks.