Financial Ratios Formulas and Explanations

Calculate financial ratios from this list of Financial Ratio Formulas Acid Test Ratio (a.k.a. Quick Ratio) Acid Test Ratio = (cash + marketable securities) / current liabilities The acid test ratio measures the immediate amount of cash immediately available to Read More

Accounts Receivable Turnover Ratio

This is the ratio of the number of times that accounts receivable amount is collected throughout the year. A high accounts receivable turnover ratio indicates a tight credit policy. A low or declining accounts receivable turnover ratio indicates a collection Read More

Number of Days Inventory Ratio

The number of days inventory is also known as average inventory period and inventory holding period A high number of days inventory indicates that their is a lack of demand for the product being sold A low days inventory ratio Read More

Financial Leverage Ratio

The financial leverage ratio is also referred to as the debt to equity ratio. The financial leverage ratio indicates the extent to which the business relies on debt financing. Upper acceptable limit of the financial leverage ratio is usually 2:1, Read More

Cash Debt Coverage Ratio

Cash debt coverage ratio definition and explanation: The cash debt coverage ratio shows the percent of debt that current cash flow can retire. A cash debt coverage ratio of 1:1 (100%) or greater shows that the company can repay all Read More

Ratios Formulas and Explanations

List of Ratios Formulas and Definitions on This Website: Listed are the financial, accounting and business ratios pages that contain formulas to calculate ratios, definitions and explanations.