Finance Ratios & Formulas.pdf

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Business Administration
Business Administration 1220E

Ratio What the ratios tells us Formula Expression PROFITABILITY What proportion of sales did each item on the SOE Vertical Statement of Earnings Item Analysis account for? What percentage of sales was spent? What Sales % percentage was kept? Return on Measure of earnings relative to investment made with Equity shareholder, owner and/or company funds. Increased Earnings (Return on earnings are the desired proceeds from invested funds. Total Equity % Investment) STABILITY Net Worth to Proportion of assets financed by shareholder, owner Total Equity % Total Assets and/or company funds (equity). Total Assets Measures the proportion of debt and equity used to Total Debt (liabilities) Debt to Equity finance assets. Compared to each dollar of equity, how Total Equity % many dollars of debt has the company taken on? Determines how many times the interest expense could Interest be paid given the company’s earnings. Compares profit EBIT X Coverage Interest Expense levels to the amount of interest owed. LIQUIDITY Measures
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