1. Gross profit (margin ratio): Gross Profit/Net Sales
    • The margin ratio is a measure of the markup as a % of Sales
    • Gross profit is Net Sales-Cost of Goods Sold (COGS)
    • Net Sales: Gross Sales – Discounts & Allowances
  2. Sales Return Percentage Ratio: Sales Returns/Total Sales
    • Is a measure of the % of sales that are returned by the customer.
  3. Sales Discount Percentage Ratio: Sales/Discounts/Total Sales
    • Is a measure of the % of sales discounts taken by the customer
  4. Accounts Receivable Turnover:  Net Value of Credit Sales/Average amount Accounts Receivable <– numerator and denominator must cover the same period of time.
    • Examines the efficiency with which receivables are being collected.
    • Higher number here is good.
  5. Number of Days in Receivables Ratio:  365/Accounts Receivable Turnover
    • Identifies how quickly receivables are being collected
    • Lower number here is good
  6. Allowance for uncollectible accounts as a percentage of receivables: Allowance for uncollectible accounts/Accounts Receivable.
    • Is a measure of the % of receivables that are expected to be uncollectible.
  7. Asset Turnover Ratio: Total Sales/Average Total Assets
    • Measure of how many times a business turned over its assets
    • Sales revenue generated with each dollar of assets the company owns
  8. Working Capital Turnover Ratio: Sales/Average working capital
    1. Working Capital = Current Assets – Current Liabilities
    2. Measure of the amount of working capital used in generating sales

 

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