Accounting Ratios List


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1. Liquidity Ratios. This first type of accounting ratio formula is used for ascertaining the liquidity position of the company. It is used for determining the paying capacity of the company towards its short term liabilities.
2. Profitability Ratios. This type of accounting ratio formulas indicates the company’s efficiency in generating profits. It indicates the earning capacity of the business in correspondence to capital employed.
3. Leverage Ratios. These types of accounting ratios are known as solvency ratios Solvency Ratios Solvency Ratios are the ratios which are calculated to judge the financial position of the organization from a long-term solvency point of view.
4. Activity/Efficiency Ratios. Working Capital Turnover ratio. It establishes the relationship of sales to Net Working capital Net Working Capital The Net Working Capital (NWC) is the difference between the total current assets and total current liabilities.
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Published: Apr 06, 2020

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Accounting Ratios - Overview, Examples, Formulas

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These ratios strip away any misleading effects caused by the accrual basis of accounting to reveal the extent to which a business is generating cash. Commonly used ratios in this classification include: Cash flow return on assets. The formula is net profit plus non-cash expenses, divided by total assets. The level of cash flow return reveals

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Published: Mar 03, 2020

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1. Current Ratio. The Current ratio Current Ratio The current ratio is a liquidity ratio that measures how efficiently a company can repay it' short-term loans within a year.
2. Acid Test Ratio/ Quick Ratio. The current ratio is generally used to evaluate an enterprise’s overall short-term solvency Solvency Solvency of a company means its ability to meet the long term financial commitments, continue its operation in the foreseeable future and achieve long term growth.
3. Absolute Liquidity Ratio. Absolute Liquidity helps to calculate actual liquidity, and for that, inventory and receivables are excluded from current assets.
4. Cash Ratio. The Cash ratio is useful Cash Ratio Is Useful Cash Ratio is calculated by dividing the total cash and the cash equivalents of the company by total current liabilities.
5. Inventory Turnover Ratio. This financial ratio measures the relative size of inventory and influences the amount of cash available to pay liabilities.
6. Debtors or Receivable Turnover Ratio. The receivable turnover ratio shows how many times the receivable was turned into cash during the period. Receivable Turnover Ratio Formula = Net Credit Sales Net Credit Sales Net credit sales is the revenue generated from goods or services sold on credit excluding the sales discount, sales allowance and sales return.
7. Capital Turnover Ratio. The capital turnover Capital Turnover Capital turnover determines the organization's capital utilization efficiency and is calculated as a ratio of total annual turnover divided by the total amount of stockholder's equity.
8. Asset Turnover Ratio. This financial ratio reveals the number of times the net tangible assets Net Tangible Assets Net Tangible Assets is the value derived from the company's total assets minus all intangible assets.
9. Net Working Capital Turnover Ratio. This financial ratio indicates whether or not working capital has been effectively utilized in making sales. Net Working capital Net Working Capital The Net Working Capital (NWC) is the difference between the total current assets and total current liabilities.
10. Cash Conversion Cycle. The Cash conversion cycle Cash Conversion Cycle The Cash Conversion Cycle (CCC) is a ratio analysis measure to evaluate the number of days or time a company converts its inventory and other inputs into cash.

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1. Accounting ratios are among the most popular and widely used tools of financial analysis because if properly analyzed, they help us identify areas that require further analysis on financial statements of corporations.
2. A ratio is a mathematical relation between two quantities expressed as a percentage, a rate or proportion. For example a ratio can derive the answer $900 or can be expressed a 100% or 9:1 or just “9” In this tutorial, we will go over 4 major categories of accounting ratios that are known as the 4 building blocks of financial statement analysis.
3. Current ratio = Current assets / Current liabilities.
4. Quick ratio = (Current assets – inventory) / Current liabilities.
5. Cash ratio = Cash / current liabilities.
6. Net Working Capital = Net working capital / total assets.
7. Internal measure = Current assets / average daily operating costs.
8. Total debt ratio = (Total assets – total equity) / Total assets.
9. Debt to Equity ratio = Total debt / total equity.
10. Equity Multiplier = Total assets / total equity.

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Also see formula of gross margin ratio method with financial analysis, balance sheet and income statement analysis tutorials for free download on Accounting4Management.com. Accounting students can take help from Video lectures, handouts, helping materials, assignments solution, On-line Quizzes, GDB, Past Papers, books and Solved problems.

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Accounting Ratios Formulas: Gross profit ratio = (Gross profit / Net sales) x 100. Net profit ratio = (Net profit / Net sales) x l00. Operating profit ratio = (Operating profit / Net sales) x 100. Expense ratios = (Individual expenses / Net sates) x 100. Operating (cost) ratio = (Operating cost / Net sales) x 100.

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Market Prospect Ratios Coverage Ratios CPA Exam Ratios to Know CMA Exam Ratios to Know 3 8 12 17 23 28 31 32 Thanks for signing up for the MyAccountingcourse.com newletter. This is a quick financial ratio cheatsheet with short explanations, formulas, and analyzes of some of the most common financial ratios. Check out www.myaccountingcourse.com

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List of financial ratios, their formula, and explanation. Learn how to compute and interpret financial ratios through this lesson. Financial ratios can be classified into ratios that measure: profitability, liquidity, management efficiency, leverage, and valuation & growth

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Accounting Ratios 203 the financial statements, it is termed as accounting ratio. For example, if the gross profit of the business is Rs. 10,000 and the ‘Revenue from Operations’ are Rs. 1,00,000, it can be said that the gross profit is 10% × 10,000 100 1,00,000 of the ‘Revenue from Operations’ . This ratio is termed as gross profit

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Accounting ratios can be expressed in various ways such as: A pure ratio like 2:1; A rate like an accounting item is 2 times of other accounting item. A percentage like an accounting item is 10% of other accounting item. Important accounting Ratios. Gross Profit Ratio: The ratio gives gross margin on trading. (Gross Profit/ Net Sales ) X 100

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Accounting ratios also referred to as financial ratios, are applied to compute the performance and profitability of a firm grounded on its financial statements. They furnish a way of stating the association between one accounting data point to another and are the source of ratio analysis. To put it in other words, an Accounting ratio implies a

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Types of Accounting Ratios. Liquidity Ratios – First among types of financial ratios is liquidity ratio; it used to judge the paying capacity of a business towards its short-term liabilities. It helps with the evaluation of a company’s ability to satisfy its short-term commitments. Higher the liquidity ratios better the company’s cash position.

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List of Ratio Analysis Formulas and Explanations! Profitability Ratios: Profit making is the main objective of business. Aim of every business concern is to earn maximum profits in absolute terms and also in relative terms i.e., profit is to be maximum in terms of risk undertaken and capital employed.

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Frequently Asked Questions

What areaccounting ratios?

What are Accounting Ratios? Accounting ratios cover a wide array of ratios that are used by accountants and act as different indicators that measure profitability, liquidity, and potential financial distress in a company’s financials.

How do you calculate net profit ratio in accounting?

Accounting Ratios Formulas: Gross profit ratio = (Gross profit / Net sales) x 100. Net profit ratio = (Net profit / Net sales) x l00. Operating profit ratio = (Operating profit / Net sales) x 100.

What are the best accounting ratios for small businesses to track?

The best accounting ratios for small businesses to track. 1 1. Gross profit margin ratio. Your gross profit margin is one of the most important ratios you can calculate for your business, and doing so is easy. 2 2. Profit margin ratio. 3 3. Quick ratio. 4 4. Current ratio. 5 5. Debt-to-equity ratio. More items

How accurate are accounting ratios as a financial statement analysis tool?

The accuracy or efficiency of accounting ratios as a financial statement analysis tool rests on the financial statements. This is because while calculating a particular financial ratio, the two or more accounting numbers used are taken from such statements.

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