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EduPristine>Blog>Step 2: Analyzing Ratios

Step 2: Analyzing Ratios

April 6, 2011

Now that we have established the cash flows via the Indirect Method, it becomes all the more essential to analyze these figures year-on-year using different ratios.

You can download a sample excel model containing the formulas for all the ratios. These ratios are list as follows –

Profitability Ratios

  • Gross Profit Margins
  • EBITDA Margins
  • EBIT Margins
  • EBT Margins/Pre-Tax Margins
  • Net Profit Margin

Return on Investment Ratios

  • Return on Assets (ROA)
  • Return on Assets (ROA) with Interest Added Back
  • Return on Invested Capital (RoIC)
  • Return on Invested Capital (RoIC) with Interest Added Back
  • Return on Stockholder’s Equity (ROE)

Activity Ratios

  • Inventory Turnover – How many times inventory was turned over or sold in a year
  • Days of Inventory – No of days the present inventory will survive
  • Receivables Turnover – How many times the revenue of recognized to the amount yet to be received
  • Days of Sales Outstanding – No of days taken to get back the money from the customers
  • Average Day’s Sales – Average Sale in a Day
  • Days of Sales Outstanding – For 0.49 sale it takes 1 day, for “Receiveables” sale it’ll take Receivable/.49 days
  • Payables Turnover – How many times in a year company pays off its creditors
  • Days of Payables – No of days a company takes to pay off it’s suppliers
  • Working Capital Turnover – How much sales is done with 1 unit of Working Capital
  • Fixed Asset Turnover – How much sales is done with one unit of Fixed Asset Turnover
  • Total asset Turnover – How much sales is done with one unit of Total Asset Turnover

Liquidity Ratios

  • Current Ratio
  • Quick Ratio
  • Cash Ratio
  • Defensive Interval Ratio
  • Cash Conversion Cycle (Net Operating Cycle)

Debt Ratios

  • Debt-to-Assets Ratio
  • Debt-to-Capital Ratio
  • Debt-to-Equity Ratio
  • Financial Leverage Ratio

Coverage Ratios


In case you are not able to download the excel file, then copy paste the following link in the address bar of your browser –

About Author

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EduPristine is a member of Adtalem Global Education (NYSE: ATGE), a global education provider headquartered in the United States. Adtalem is a 3 billion dollars (20,000 crores) company that has about 9 institutions and companies with more than 16,000 employees spread across 145 locations. Adtalem takes pride in training 142,000 degree-seeking students all over the world.The organization's purpose is to empower students to achieve their goals, find success and make inspiring contributions to our global community. EduPristine is one of India's leading training providers in Analytics, Accounting, Finance, Healthcare, and Marketing. Founded in 2008, EduPristine has a strong online platform and network of classrooms across India and caters to self-paced learning and online learning, in addition to classroom learning


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