Ratios

Financial Resources
Financial Ratios

Definition: A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise's financialstatements.


Vocabulary:
yield the total amount of profit or income produced from a business or investment
subpar used to describe something that is below average, or below what is expected
accruing toallow something to increase in amount over a period of time.
equity the capital that a company gets from selling its shares rather than borrowing money
maturity the time when an investment orinsurance product becomes ready to be paid
relying To need a particular thing or the help and support of someone or something in order to continue
Leverage he power to influence people and get theresults you want.


Profitability Ratios
01 Name Gross profit margin
How is Calculated? Sales - Cost of goods sold
Sales
What does it show? An indication of the total margin available to coveroperating expenses and yield a profit.
02 Name Net profit margin (or net return on sales)
How is Calculated? Profits after taxes
sales
What does it show? Shows after tax profits per unitcurrency of sales. Subpar profit margins indicate that the firm's sales prices are relatively low or that costs are relatively high, or both.
03 Name Operating profit margin
How is Calculated? Profitsbefore taxes and interest
sales
What does it show? An indication of the firm's profitability from current operations without regard to the interest charges accruing from the capital structure
04Name Return on total Assets
How is Calculated? Profits after taxes or Profits after taxes + interest
Total assets Total assetsWhat does it show? A measure of the return on total investment the enterprise.
05 Name Return on stockholder's equity (or return on net worth)
How is Calculated? Profits after taxes
Total...