Business Ratios and Formulas

About the Author; Preface; 1. Introduction; 2. Asset Utilization Measurements; Sales to Working Capital Ratio; Sales to Fixed Assets Ratio; Sales to Administrative Expenses Ratio; Sales to Equity Ratio; Sales per Person; Sales Backlog Ratio; Sales Returns to Gross Sales Ratio; Repairs and Maintenance Expense to Fixed Assets Ratio; Accumulated Depreciation to Fixed Assets Ratio; Fringe Benefits to Wages and Salaries Expense; Sales Expenses to Sales Ratio; Discretionary Cost Ratio; Interest Expense to Debt Ratio; Foreign Exchange Ratios; Overhead Rate; Goodwill to Assets Ratio; Overhead to Cost of Sales Ratio; Investment Turnover; Break-Even Point; Margin of Safety; Tax Rate Percentage; 3. Operating Performance Measurements; Operating Assets Ratio; Sales to Operating Income Ratio; Sales Margin; Gross Profit Percentage; Gross Profit Index; Investment Income Percentage; Operating Profit Percentage; Operating Leverage Ratio; Net Income Percentage; Profit per Person; 4. Cash Flow Measurements; Cash Flow from Operations; Cash Flow Return on Sales; Fixed Charge Coverage; Expense Coverage Days; Cash Flow Coverage Ratio; Cash Receipts to Billed Sales and Progress Payments; Cash to Current Assets Ratio; Cash Flow to Fixed Asset Requirements; Cash Flow Return on Assets; Cash to Working Capital Ratio; Cash Reinvestment Ratio; Cash to Current Liabilities Ratio; Cash Flow to Debt Ratio; Stock Price to Cash Flow Ratio; Dividend Payout Ratio; 5. Liquidity Measurements; Accounts Receivable Turnover; Average Receivable Collection Period; Days Delinquent Sales Outstanding; Days Sales in Receivables Index; Accounts Receivable Investment; Ending Receivable Balance; Inventory to Sales Ratio; Inventory Turnover; Inventory to Working Capital Ratio; Liquidity Index; Accounts Payable Days; Accounts Payable Turnover; Current Ratio; Quick Ratio; Cash Ratio; Sales to Current Assets Ratio; Working Capital Productivity; Defensive Interval Ratio; Current Liability Ratio; Required Current Liabilities to Total Current Liabilities Ratio; Working Capital to Debt Ratio; Risky Asset Conversion Ratio; Noncurrent Assets to Noncurrent Liabilities Ratio; Short-term Debt to Long-term Debt Ratio; Altman's Z-Score Bankruptcy Prediction Formula; 6. Capital Structure and Solvency Measurements; Times Interest Earned; Debt Coverage Ratio; Asset Quality Index; Accruals to Assets Ratio; Times Preferred Dividend Earned; Debt to Equity Ratio; Funded Capital Ratio; Retained Earnings to Stockholders' Equity; Preferred Stock to Total Stockholders' Equity; Issued Shares to Authorized Shares; 7. Return on Investment Measurements; Net Worth; Book Value Per Share; Tangible Book Value; Return on Assets Employed; Return on Operating Assets; Return on Equity Percentage; Return on Common Equity; Financial Leverage Index; Equity Growth Rate; Earnings per Share; Percentage Change in Earnings Per Share; Economic Value Added; Dividend Payout Ratio; Dividend Yield Ratio; 8. Market Performance Measurements; Insider Stock Buy-Sell Ratio; Market Value Added; Stock Options to Common Shares Ratio; Cost of Capital; Sales to Stock Price Ratio; Price/Earnings Ratio; Capitalization Rate; 9. Measurements for the Accounting/Finance Department; Purchase Discounts Taken to Total Discounts; Percentage of Payment Discounts Missed; Transactions Processed per Person; Transaction Error Rate; Average Time to Issue Invoices; Average Employee Expense Report Turnaround Time; Payroll Transaction Fees per Employee; Time to Produce Financial Statements; Percentage of Tax Filing Dates Missed; Proportion of Products Costed Prior to Release; Internal Audit Savings to Cost Percentage; Internal Audit Efficiency; Bad Debt Percentage; Percent of Receivables over XX Days Old; Percentage Collected of Dollar Volume Assigned; Percent of Cash Applied on Day of Receipt; Cost of Credit; Earnings Rate on Invested Funds; Brokerage Fee Percentage; Borrowing Base Usage Percentage; 10. Measurements for the Engineering Department; Bill of Material Accuracy; Labor Routing Accuracy; Percentage of New Products Introduced; Percentage of Sales from New Products; Percentage of New Parts Used in New Products; Percentage of Existing Parts Reused in New Products; Average Number of Distinct Products per Design Platform; Percentage of Products Reaching Market before Competition; Ratio of Actual to Target Cost; Warranty Claims Percentage; Time from Design Inception to Production; Percentage of Floor Space Utilization; 11. Measurements for the Logistics Department; Production Schedule Accuracy; Economic Order Quantity; Number of Orders to Place in a Period; Economic Production Run Size; Raw Material Inventory Turns; Raw Material Content; Finished Goods Inventory Turns; Obsolete Inventory Percentage; Percentage of Inventory XX Days Old; Percentage of Returnable Inventory; Inventory Accuracy; Percentage of Certified Suppliers; Electronic Data Interchange Supplier Percentage; On-Time Parts Delivery Percentage; Purchased Component Defect Rate; Incoming Components Correct Quantity Percentage; Percentage of Actual Payments Varying from Purchase Order Price; Percentage of Purchase Orders Issued below Minimum Dollar Level; Proportion of Corporate Credit Card Usage; Percentage of Receipts Authorized by Purchase Orders; Freight Audit Recovery Ratio; Picking Accuracy for Assembled Products; Average Time to Ship; On-Time Delivery Percentage; Percentage of Products Damaged in Transit; Percentage of Sales through Distributors; 12. Measurements for the Production Department; Constraint Productivity; Constraint Rework Percentage; Constraint Schedule Attainment; Constraint Utilization; Degree of Unbalance; Throughput Effectiveness; Break-Even Plant Capacity; Manufacturing Effectiveness; Productivity Index; Unit Output per Direct Labor Hour; Average Equipment Setup Time; Unscheduled Machine Downtime Percentage; Acceptable Product Completion Percentage; Work-in-Process Turnover; Scrap Percentage; Warranty Claims Percentage; Maintenance Expense to Fixed Assets Ratio; Indirect Expense Index; Reorder Point; On-Time Delivery Ratio; 13. Measurements for the Sales and Marketing Department; Market Share; Customer Turnover; Browse to Buy Conversion Ratio; Recency; Direct Mail Effectiveness Ratio; Inbound Telemarketing Retention Ratio; Quote to Close Ratio; Sales per Salesperson; Sales Productivity; Sales Effectiveness; Sales Trend Percentage by Product Line; Product Demand Elasticity; Days of Backlog; 14. Measurement Analysis with an Electronic Spreadsheet; Financial Statement Proportional Analysis; Financial Statement Ratio Analysis; Automated Ratio Result Analysis; Leverage Analysis; Trend Analysis; Forecasting; Cash Flow Analysis; Capital Asset Analysis; Compounding Analysis; Investment Analysis; Risk Analysis; Glossary; Appendix: Measurement Summary; Index