Key Ratios used Financial Ratio Analysis

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  1. Current Ratio=Current liabilities/Current assets​​
  2. Accounts Receivable Turnover=Net Credit Sales​/Average accounts receivable
  3. Average collection period =[Average accounts receivable/Total net sales ]365
  4. Inventory turnover= Sales ÷ Average Inventory
  5. Days in inventory= (Average inventory ÷ cost of goods sold) x 365
  6. Profit margin= (Net sales –COGS ÷ Net sales)
  7. Asset turnover= [Total Sales÷(beginning assets + ending assets)/2)]
  8. Return on assets= net income ÷ Total assets
  9. Return on common stockholder’s equity=
  10. Debt to total assets ratio=( Short-Term Debt + Long-Term Debt​​) ÷ Total assets
  11. Times interest earned=Income before interest expense and taxes ÷ interest expense
  12. Free cash flow= sales revenue – (operating costs + taxes) – required investments in operating capital.