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Current Ratio
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Current Assets:Current Liabilities
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Company's ability to meet its short term obligations
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Quick Ratio
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Liquid Assets:Current Liabilities
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Liquid assets not only excludes inventory
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Debt ratio
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Total Debt / Total Assets
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Indicates extent to which company uses external financing to finance assets
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Interest Cover or Times interest earned
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EBIT / Interest
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Ability to meet interest obligation. EBITDA also used.
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Debt/Equity ratio
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Total Debt/Total Equity
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Gearing ratio of the company
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Profit Margin
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Profit / Turnover
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Calculated at different levels. Non-trade income should not be included
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Organisational profitability / Return on total assets
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EBIAT / Total Assets
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Return on enterprise as a whole
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Return on Equity
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Equity Earnings / Total Equity
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Difference between ROA and ROE is financial leverage
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Financial leverage
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ROA vs ROE
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Inventory turnover
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Cost of sales / Average inventory (times)
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Effectively manage and control inventory. Poor turnover may indicate obsolete stock. (if you don't have COS use SALES)
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Inventory turnover rate
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Average inventory / COS x 365 (days)
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Length of time that inventory is on average held before it is sold.
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Days' sales in closing inventory
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Closing Inventory / COS x 365 (days)
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Days sales left from current closing inventory
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Debtor's turnover
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Credit Sales / Average Debtor (times)
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Evaluate application of Co's credit policy. Too short (sales will be lost) & too long (bad debts) & opp cost
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Debtors Collection period
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Average debtors / Credit sales x 365 (days)
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Reciprocal relationship with debtors turnover
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Days Sales in closing debtors
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Closing debtors / Credit sales x 365 (days)
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Sales represented by closing debtors
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Creditors payment period
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Average creditors / Credit purchases x 365 (days)
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Use COS if credit purchases not available. Too short (not utilising free credit) & too long (Bad reputation)
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Asset Turnover
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Net Sales / Assets
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Management ability to utilise assets effectively to generate sales. Can use different categories of assets
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Earnings per share
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Earnings / WANOS
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Dividend per share
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Dividend / No of shares in issue
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Earnings Yield
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EPS / Share price
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Dividend Yield
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DPS / Share Price
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Dividend cover
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EPS / DPS
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Price - Earnings Ratio
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Share Price / EPS
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High PE ratio can indicate investor's confidence and growth prospects. Repayment period in years of share investment. How much investors will pay per R1 of co's earnings.
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PEG
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PE / Expected sustainable growth
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2 companies taht are in different growth stages (eliminating growth impact)
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Nest Asset Value per Share
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NAV / WANOS
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Compare share price to NAV ps = trading at a discount?
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Shareholder return
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(Share price(end) - Share price(beg) + Dividend) / Share price(beg)
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Compare to ALSI return
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Dividend Payout ratio
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DPS / EPS
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Use to calculate sustainable growth
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Sustainable growth
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1 - Dividend Payout Ratio
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Cash flow to total debt
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CF from Operations / Total Debt
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Indicator of financial distress
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Cash ability to cover finance charges
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CF from Operations / Interest Paid
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Ability to pay interest from cash available
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Cash generating ability of co
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CF from Operations / Turnover
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