Business ratios

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This app allows you to calculate a number of business ratios based on a company's financial statements.

A business ratio or accounting ratio is a relationship between two numerical values taken from said financial statements. Many standard ratios are used to evaluate the overall financial condition of a corporation.

This app allows you to calculate the following ratios

  1. Profitability ratios: gross profit margin, operating profit margin and net profit margin.
    • Gross profit margin: It is calculated as (Sales revenue- Cost of goods sold) / Sales revenue. It measures the gross profit generated by each dollar of sales. Gross profit is the part of sales revenue that exceed the cost of goods sold.
    • Operating profit margin: It is calculated as [(Sales revenue)- (Cost of goods sold + Operating expenses)] / Sales revenue. It measures the operating profit generated by each dollar of sales. Operating profit is the part of gross profit that exceeds operating expenses.
    • Net profit margin: It is calculated as [(Sales revenue+other income) – (Cost of goods sold+Operating expenses+Interest Expense)] / (Total current assets + Total long term assets). It represents the profitability of a company’s assets at generating income.
  2. Liquidity ratios: current ratio and quick ratio.
    • Current ratio: It is calculated as Total current assets / Total current liabilities'. It is frequently used as an indicator of a company's liquidity, its ability to meet short-term obligations.
    • Quick ratio: It is calculated as (Total current assets / Inventory) / Total current liabilities. Also known as acid-test, it measures the ability of a company to use its near cash or quick assets to extinguish its current liabilities immediately.
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  4. Operating ratios: inventory turnover ratio, sales to receivables ratio and return on assets.
    • Inventory turnover: It is calculated as Cost of goods sold / Inventory . Measure of the number of times inventory is sold or used in a time period such as a year. It is calculated to see if a business has an excessive inventory in comparison to its sales level.
    • Return on assets: It is calculated as [(Sales revenue + other income) – (Cost of goods sold + Operating expenses + Interest Expense)] / Sales revenue. It measures the net profit generated by each dollar of sales. Net profit is the part of gross profit that exceeds operating expenses and all other expenses.
    • Sales to receivables: It is calculated as Sales revenue / Account receivables. It represents the proportion between unpaid sales and the total sales revenue.
  5. Solvency ratios: debt to worth and working capital.
    • Debt to worth ratio: It is calculated as (Total current liabilities + Total long term liabilities) / (Total current assets + Total long term assets + Total current liabilities + Total long term liabilities). It represents the relative proportion of shareholders' equity and debt used to finance a company's assets.
    • Working capital: It is calculated as Total current assets – Total current liabilities. It represents the operating liquidity available to a business or organisation.