Ratio Analysis

Ratios used in financial analysis compare companies to or within an industry. We have listed groups of commonly used ratios with links to examples, explanations, and formulas. Continue reading

Total Asset Turnover Ratio

The total assets turnover ratio measures the use of all assets in terms of sales, by comparing sales with net total assets. This interactive tutorial walks you through the calculations as well as where on the financial statements to find the numbers. Continue reading

Inventory Turnover Ratio

The inventory turnover ratio compares sales to inventories, reflecting a company’s ability to convert inventory into cash. This interactive tutorial walks you through the calculations, and shows you where to find the numbers of your financial statements. Continue reading

Fixed Assets Turnover Ratio

The fixed assets turnover ratio measures how fixed assets are used to generate sales, by comparing sales to net fixed assets. This interactive tutorial walks you through the calculations as well as where to find the numbers on your financial statements. Continue reading

Days Sales Outstanding or DSO

The days sales outstanding ratio (DSO) gives an indication of how long it takes to collect accounts receivables, comparing outstanding receivables to average daily sales. This tutorial walks you through the calculation as well as where on the financial statements you’d find the numbers. Continue reading

Profit Margin

The profit margin shows the relationship between net income (profit) and sales. This interactive tutorial explains the concept by walking you through the calculations, including where to find the numbers on the income statement. Continue reading

Gross Profit Ratio

The gross profit ratio indicates how much of each sales dollar is available to meet expenses and profits after merely paying for the goods that were sold. This interactive tutorial explains the gross profit ratio by walking you through the steps, including where Sales and Cost of Goods Sold are on the Income Statement. It lets you use your own numbers — great for checking homework answers! Continue reading