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activity + profability

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عوض سليمان
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19 views6 pages

activity + profability

Uploaded by

عوض سليمان
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1

Activity Ratios
Activity ratios provide information about a firm’s ability to
efficiently manage its resources

1/Accounts Receivable Turnover Ratio

the efficiency of a firm’s accounts receivable collections

Net Annualized Credit Sales

Average Gross Accounts Receivable

Days of Sales in Receivables Ratio:

is measure of the how efficiently the company is collecting its accounts


receivable. It tells us how many days an average receivable is held
before it is collected

365, 360 or 300

Receivables Turnover

or

Average Accounts Receivable

Average Daily Sales

1
Alaa abd Elmoniem

1
2/Inventory Turnover Ratio

calculates how many times in a year the firm sells its average level of
inventory

Annualized Cost of Goods Sold

Average Inventory

Days of Sales in Inventory Ratio :

the # of days that an item is in stock before the sale

365, 320, or 300

Inventory Turnover

or

Average Inventory

Average Daily Cost of Sales

(Annual Cost of Sales ÷ 365)

2
3/Accounts Payable Turnover Ratio

If this ratio is decreasing over time, it is an indication that the company


is paying its payables more slowly. This could indicate liquidity
problems

Annual Credit Purchases

Average Accounts Payable

Days of Purchases in Payables Ratio :

calculates the number of days that a company requires to pay its


inventory suppliers:

 A low result indicates supplier payments are made quickly

 A high result indicates long delays to pay suppliers

Average Accounts Payable

Average Daily Purchases

(Annual Credit Purchases ÷ 365)

3
4/Total Asset Turnover Ratio

measures the amount of sales revenue the company is generating from


the use of all of its assets. It provides a means to measure the overall
efficiency of the company’s use of all of its investments, as represented
by both short-term assets and long-term assets

Sales

Average Total Assets

5/Fixed Asset Turnover Ratio

Sales

Average Net Plant, Property and Equipment

4
Profitability Ratios
1/Gross Profit Margin

ratio measures the amount of profit that each dollar of sales generates
to cover period expenses such sales, marketing, and administrative
expenses

Net Sales - Cost of Goods Sold

Net Sales (sales - sales discounts – returns and allowances)

2/Operating Profit Margin Percentage

Operating Income

Net Sales

3/Net Profit Margin Percentage

Net Income

Net Sales

4/EBITDA (Earnings Before Interest, Taxes, Depreciation and


Amortization)

is used to analyze operating profitability before non-operating


expenses such as interest and other non-core operating expenses and
before non-cash charges such as depreciation and amortization

EBITDA

Net Sales

5
5/Return on Invested Capital

• Return on Invested Capital includes Return on Assets (ROA) and


Return on Equity (ROE).
• The formula for Return on Assets is:

Net Income

Average Total Assets

Return on Equity (ROE)

Net Income

Average Total Equity

return on common equity (ROCE)

Net Income - Preferred Dividends

Average Common Equity

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