Ratio Formula Purpose or Use 4. Current ratio Curentassets Measures short-tem debt-peying ability ‘Gument raping 2. Quick or aoid-test Gach, short-term investments, Measures immediate short-term liquidity rato and net reccivabiea ‘Current Fabitias 2. Curent cash debt ‘Net cash providoo by Mecsures a company's abilty to payoff its coverage ‘operating acts ‘current apiliss ina given yoar rom ‘Rverage curent tanaes ‘operations Activity 4. Accounts recatvable Net sales Moasurss iquitty of recevabios turnover [Average Pade recelvables Ge) 6. inventory tumover (Cost of goods sold Measurse iquidty of inventory ‘Average Inventixy 6. Ascot tumover Net sas Measures how efficiently assets are used fo ‘Rretage total assets ‘generate sales Promapaity 7. Proft margin on Net ncome Measures net income generated by each dolar sales eda ‘of sales 6 Rotum on ascate Net income Measures overall prottabitty of assets ‘Rrerage total assis 1. Return on snare ‘capital—orainary 10, Eamings par share 11. Price-camings ratio 12, Payout ratio IV. Coverage 13, Debt fo assets ratio 14. Tes interest eamed 18, Cash abot coverage 16. Book value per share 17. Free cash flow |Natineome minus pretence dwvisenas ‘Average shareholders’ equily—ocirary Net income minus preference dividends ‘Welonted average narrber of shares outstanding Market price of share ‘Earnings per share ‘Net neome [Net cash proviled by operating sctivitis ~ Capiial expeniures ~ Dividends Measure prota of owners investment Measures net income eamed on each ordinary Measures the nevcsntage of ola assets provided Maasurse abity to mect interest payments as ‘they come due Moasurse a company's abity to repay fs total labtites in @ given year trom its operations Measures the amount aach orcinary share woul! feos Ifthe company were iquidated af the ‘amounts reported on the statement of nancial postion Measures tne amount of ascretionary cash flow