Description Of Financial Metrics
Name
Description/Function
How is this calculated or used?
What does this tell me?
Company Dashboard
Total Revenue
Includes income from: sales less returns Sum of all revenue and income items.
and allowances and discounts, revenue
from affiliates, financial revenue, and other
income (interest, dividents, etc.).
Total Revenue is the total of all income
sources for the company. It includes both
operating revenue and other revenue
sources such as interest income.
Gross Profit
Total Revenue net of the costs of
producing that revenue.
Gross Profit is the amount of profit made
on the selling of a product or service
before other operating expenses.
Net Income (Loss)
Income from operations less discontinued Continuing Operations less Discontinued
operations and extraordinary items.
Operations less Extraordinary Items from
Income.
Net income is the "bottom line" it is the
amount of profit or loss that is generated
for a specific period.
Gross Margin %
Ratio of Gross Profit to Revenue
Gross Profit divided by Total Revenue.
This ratio indicates how much profit is
being made from the sale of product
before other operating expenses. If this
ratio was 35%, then for every dollar of
sales the company makes 35 cents. A
trend of this number getting smaller would
signal lower profitability. As sales go up
and down, this ratio would remain
relatively constant.
EBITDA
Earnings Before Interest, Taxes,
Depreciation and Amortization
Income (loss) Before Taxes plus Interest
Expense plus Depreciation Expense plus
plus Amortization Expense
This is a common cash flow/profitability
measurement. Many industries focus on
this figure more than profitability. The
reason for this is one company can be
compared to another eliminating the
issues of how a company is financed
(interest) what type of assets the company
owns (depreciation/amortization) or how it
is taxed (income taxes).
Total Revenue less Cost of Revenue.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Company Dashboard (continued)
Days Sales Outstanding
Ratio of sales to receivables converted to 365 days divided by the Receivable Turns
a number of days figure
ratio (Current period Sales (annualized for
the period) divided by Accounts
Receivable.)
This is the same tool as Receivable turns
but converted to a day figure. The larger
the number of days the longer it takes a
company to collect its receivables. This
ratio should be compared to the actual
terms the company offers its customers to
see how well those customers pay their
invoices.
Days (on Hand) Inventory
Inventory turnover expressed in a number 365 days divided by Inventory Turnover
of days.
ratio (Cost of Goods Sold (annualized for
the period) divided by inventory.)
This ratio is similar to inventory turnover
but the result is expressed in days as
apposed to a number of times. A turnover
ratio of 12 would equate to 30 days in
inventory on hand. For some companies it
is easier to evaluate their inventory
efficiencies by thinking in days. They
often know how long a manufacturing
process takes or how long they want
something to sit on a shelf.
Days Payable
Payables Turnover ratio expressed in
terms of days.
365 days times (Accounts Payable divided This ratio is the same as payable turnover
by Cost of Goods Solds (annualized for
but the result is converted to days. It is
the period)).
helpful to compare this number of days to
the actual terms that are offered to the
company.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Company Dashboard (continued)
Total Debt / Equity
Ratio of Total Debt to Total Equity.
Total Debt divided by Total Equity. (Total
Debt includes: LT and ST debt, current
maturities, lines of credit, amounts due to
stockholders and related parties. Total
Equity includes: All equity items plus net
income.)
Debt to Shareholders Equity is similar to
Total liabilities to Net worth, but it excludes
any equity that is not shareholder's equity.
For Example shareholders equity would
include Retained Earnings, common stock
and paid in capital but would exclude
preference shares and subordinated debt equity. If this is number is increasing over
time then the shareholders are becoming
more leveraged and will have smaller
claims to the company's assets. A larger
number signals increased risk as the
company has limited financial flexibility.
Funded Debt / EBITDA
Ratio of Funded Debt to EBITDA
(Earnings Before Interest, Taxes,
Depreciation, & Amortization.
Funded Debt divided by EBITDA
(annualized for the period). (Funded debt
includes LT and ST debt, current
maturities, and lines of credit. EBITDA is
income calculated before interest, taxes,
depreciation and amortization.)
This ratio tells one how many years it will
take a company to repay its existing debt
load at it current cash flow - as defined by
EBITDA - level. The higher the number
the more cash flow leveraged the
company is. A number of 6.0 would
highlight it would take six years at the
current debt level to repay the debt. This
ratio might be acceptable at the point a
loan is originally made because the
company can concentrate on debt
repayment over the next six years. If this
is a historical figure and the company is
looking to borrow more funds, it would be
more difficult to loan the money since the
repayment would be so long.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Annual Dashboard
Total Revenue
Includes income from: sales less returns Sum of all revenue and income items.
and allowances and discounts, revenue
from affiliates, financial revenue, and other
income (interest, dividents, etc.).
Total Revnue is the total of all income
sources for the company. It includes both
operating revenue and other revenue
sources such as interst income.
Gross Profit
Total Revenue net of the costs of
producing that revenue.
Gross Profit is the amount of profit made
on the selling of a product or service
before other operating expenses.
Net Income (Loss)
Income from operations less discontinued Continuing Operations less Discontinued
operations and extraordinary items.
Operations less Extraordinary Items from
Income.
Net income is the "bottom line" it is the
amount of profit or loss that is generated
for a specific period.
Gross Margin %
Ratio of Gross Profit to Revenue
Gross Profit divided by Total Revenue.
This ratio indicates how much profit is
being made from the sale of product
before other operating expenses. If this
ratio was 35%, then for every dollar of
sales the company makes 35 cents. A
trend of this number getting smaller would
signal lower profitability. As sales go up
and down, this ratio would remain
relatively constant.
EBITDA
Earnings Before Interest, Taxes,
Depreciation and Amortization
Income (loss) Before Taxes plus Interest
Expense plus Depreciation Expense plus
plus Amortization Expense
This is a common cash flow/profitability
measurement. Many industries focus on
this figure more than profitability. The
reason for this is one company can be
compared to another eliminating the
issues of how a company is financed
(interest) what type of assets the company
owns (depreciation/amortization) or how it
is taxed (income taxes).
Total Revenue less Cost of Revenue.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Annual Dashboard (continued)
Days Sales Outstanding
Ratio of sales to receivables converted to 365 days divided by the Receivable Turns
a number of days figure
ratio (Current period Sales (annualized for
the period) divided by Accounts
Receivable.)
This is the same tool as Receivable turns
but converted to a day figure. The larger
the number of days the longer it takes a
company to collect its receivables. This
ratio should be compared to the actual
terms the company offers its customers to
see how well those customers pay their
invoices.
Days (on Hand) Inventory
Inventory turnover expressed in a number 365 days divided by Inventory Turnover
of days.
ratio (Cost of Goods Sold (annualized for
the period) divided by inventory.)
This ratio is similar to inventory turnover
but the result is expressed in days as
apposed to a number of times. A turnover
ratio of 12 would equate to 30 days in
inventory on hand. For some companies it
is easier to evaluate their inventory
efficiencies by thinking in days. They
often know how long a manufacturing
process takes or how long they want
something to sit on a shelf.
Days Payable
Payables Turnover ratio expressed in
terms of days.
365 days times (Accounts Payable divided This ratio is the same as payable turnover
by Cost of Goods Solds (annualized for
but the result is converted to days. It is
the period)).
helpful to compare this number of days to
the actual terms that are offered to the
company.
Total Debt / Equity
Ratio of Total Debt to Total Equity.
Total Debt divided by Total Equity. (Total
Debt includes: LT and ST debt, current
maturities, lines of credit, amounts due to
stockholders and related parties. Total
Equity includes: All equity items plus net
income.)
Debt to Shareholders Equity is similar to
Total liabilities to Net worth, but it excludes
any equity that is not shareholders's
equity. For Example shareholders equity
would include Retained Earnings, common
stock and paid in capital but would exclude
preference shares and subordinated debt equity. If this is number is increasing over
time then the shareholders are becoming
more leveraged and will have smaller
claims to the company's assets. A larger
number signals increased risk as the
company has limited financial flexibility.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Annual Dashboard (continued)
Funded Debt / EBITDA
Ratio of Funded Debt to EBITDA
(Earnings Before Interest, Taxes,
Depreciation, & Amortization.
Funded Debt divided by EBITDA
(annualized for the period). (Funded debt
includes LT and ST debt, current
maturities, and lines of credit. EBITDA is
income calculated before interest, taxes,
depreciation and amortization.)
This ratio tells one how many years it will
take a company to repay its existing debt
load at it current cash flow - as defined by
EBITDA - level. The higher the number
the more cash flow leveraged the
company is. A number of 6.0 would
highlight it would take six years at the
current debt level to repay the debt. This
ratio might be acceptable at the point a
loan is originally made because the
company can concentrate on debt
repayment over the next six years. If this
is a historical figure and the company is
looking to borrow more funds, it would be
more difficult to loan the money since the
repayment would be so long.\
Name
Description/Function
How is this calculated or used?
What does this tell me?
Income Statement Analysis - Profitability Analysis
COGS %
Ratio of Cost of Goods Sold (COGS) to
Revenue
Cost of Goods Sold divided by Total
Revenue.
This ratio tells how much of revenue is tied
up in the cost of the product. If this ratio
was 65% then for every dollar in sales 65
cents is tied up in product costs. A trend
of this number getting larger each period
would signal that the cost of the product or
service is increasing.
Gross Margin %
Ratio of Gross Profit to Revenue
Gross Profit divided by Total Revenue.
This ratio indicates how much profit is
being made from the sale of product
before other operating expenses. If this
ratio was 35%, then for every dollar of
sales the company makes 35 cents. A
trend of this number getting smaller would
signal lower profitability. As sales go up
and down, this ratio would remain
relatively constant.
Operating Expenses /
Revenue (%)
Ratio of Operating Expenses to Revenue
Total Operating Expenses divided by Total This ratio tells how much of revenue is tied
Revenue.
up in operating expenses. If this ratio is
21% it would mean that for every dollar of
sales 21 cents is going to operating
expenses. The positive trend is for this
ratio to decline as sales increase. The
logic being that as the company's sales
grow, they do not immediately pay more
rent, utilities, salaries etc. Eventually this
does not hold true and the company
exceeds its resources and needs to
expand some aspect of their operating
expenses.
SGA / Revenue (%)
Ratio of Selling, General and
Administrative Expenses to Revenue
SGA Expenses divided by Total Revenue. This ratio indicates how much each dollar
in sales is used to cover SG&A expenses.
A positive trend would be this ratio
decreasing over time.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Income Statement Analysis - Profitability Analysis (continued)
Operating Margin %
Ratio of Operating Profit to Revenue
Operating Income (loss) divided by Total
Revenue.
This ratio indicates how much of each
dollar in sales is converted to profitable
operations. A positive ratio would be this
ratio increasing over time. This is a
profitability ratio for the core operations
and does not include other
income/expense, income taxes or
extraordinary items.
Net Margin % (before tax)
Ratio of Profit Before Tax to Revenue
Income (loss) Before Taxes divided by
Total Revenue.
This ratio indicates how much of each
dollar in sales is profit after COGS,
Operating expenses and other
income/expense.
Net Margin % (after tax)
Ratio of Profit After Tax to Revenue
Net Income (loss) divided by Total
Revenue.
This ratio indicates how much of each
dollar in sales is profit after COGS,
Operating expenses, other
income/expense and extraordinary items.
A positive trend would be this ratio
increasing over time.
EBIT
Earnings Before Interest and Taxes
Income (loss) Before Taxes plus Interest
Expense
This represents the dollar amount of
earnings before interest and taxes.
EBITDA
Earnings Before Interest, Taxes,
Depreciation and Amortization
Income (loss) Before Taxes plus Interest
Expense plus Depreciation Expense plus
plus Amortization Expense
This is a common cash flow/profitability
measurement. Many industries focus on
this figure more than profitability. The
reason for this is one company can be
compared to another eliminating the
issues of how a company is financed
(interest) what type of assets the company
owns (depreciation/amortization) or how it
is taxed (income taxes).
EBITDA %
Ratio of Earnings Before Interest, Taxes, EBITDA divided by Total Revenue.
Depreciation and Amortization percentage
to Revenues
This ratio allows one to see what
percentage of sales is available to service
debt, purchase assets and cover taxes. A
positive trend would be an increasing
percentage.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Income Statement Analysis - Profitability Analysis (continued)
Cash from Ops / Revenue Ratio of Cash Flow from Operations to
(%)
Revenue
Net Cash from Operating Activities divided This is a ratio of how efficiently are your
by Total Revenue.
sales being converted to cash flow. This
ratio can swing dramatically month to
month if you have large changes in
revenue, accounts receivable or inventory.
Total Revenue
Includes income from: sales less returns Sum of all revenue and income items.
and allowances and discounts, revenue
from affiliates, financial revenue, and other
income (interest, dividents, etc.).
Sum of all revenue and income items.
Total Cost of Revenue
Includes all costs associated with the
production of revenue.
Sum of all costs associated with the
production of revenue.
Sum of all costs associated with the
production of revenue.
Gross Profit
Total Revenue net of the costs of
producing that revenue.
Total Revenue less Cost of Revenue.
Total Revenue less Cost of Revenue.
Total Operating Expenses Includes all expenses associated with
business operations.
Sum of all expenses associated with
business operations.
Sum of all expenses associated with
business operations.
Operating Income (Loss)
Income associated with company
operations.
Gross Profit less Total Operating
Expenses.
Gross Profit less Total Operating
Expenses.
Total Other Income
Includes: Interest & divident income,
Sum of all other income items.
income from affiliates, rental income, farm
& fishing revenue, rent & royalty income,
and other miscellaneous income items.
Sum of all other income items.
Total Other Expenses
Iincludes: Interest expense, incentive
compensation, gain/loss on sale, and
other miscellaneous expenses.
Sum of all other expense items.
Sum of all other expense items.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Income Statement Analysis - Profitability Analysis (continued)
Total Other Income/
Expense
Total Other Income net of other expense
items.
Total Other Income less Total Other
Expenses.
Total Other Income less Total Other
Expenses.
Income (Loss) Before
Taxes
Income calculated from tax expense.
Operating Income (loss) plus Total Other
Income/Expense
Operating Income (loss) plus Total Other
Income/Expense
Income Tax Expense
Income Tax Expense.
Income Tax Expense includes: Current & Income Tax Expense includes: Current &
deferred federal and state taxes & income deferred federal and state taxes & income
tax credits.
tax credits.
Income from Continuing
Operations
Income calculated after tax expenses.
Income (loss) Before Taxes less Income
Tax Expense.
Net Income (Loss)
Income from operations less discontinued Continuing Operations less Discontinued
operations and extraordinary items.
Operations less Extraordinary Items from
Income.
Income (loss) Before Taxes less Income
Tax Expense.
Continuing Operations less Discontinued
Operations less Extraordinary Items from
Income.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Balance Sheet Analysis
Total Current Assets
Total Current Assets
Sum of all Current Assets.
This it the total of all assets that are either
cash or will convert to cash in the next 12
months. The logic here is that inventory
will be sold and will become accounts
receivable which will be collected for cash.
This is often compared to current
liabilities.
Total Fixed Assets
Total Fixed Assets
Net of fixed assets less accumulated
depreciation.
This represents the estimated useful life of
assets in use. It simply takes the initial
cost of assets such as buildings,
equipment etc. and subtracts the total
accumulated depreciatioin for these
itesms. It does not represent the market
value of the assets.
Total Other Assets
Total other long term assets includes:
Investments from affiliates, amounts due
from shareholders & related parties,
intangible & depletable assets net of
associated amortization & depletion, &
other miscellaneous long term assets.
Sum of all Other Long Term Assets.
Simply the sum of other long term assets
Total Assets
Total Assets
Sum of all Current and Long Term Assets. Simply the sum of all assets
Total Current Liabilities
Total Current Liabilities
Sum of all Current Liabilities.
This is the total of all obligations that will
become due and payable over the next 12
months. It will include accounts payable,
short term debt and accrued current
liabilty. This is usually compared to
currrent assets.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Balance Sheet Analysis (continued)
Long Term Debt
Total Long Term Debt includes: Long term Sum of all Long Term Debt.
bank debt, loans & notes payable, secured
& unsecured debt, subordinated debt,
mortgages, bonds & debentures, amounts
due to shareholders, officers, & related
parties, & captialized lease obligations,
etc.
Simply the sum of all long term interest
bearing debt
Total Debt
Total Debt includes: LT and ST debt,
Sum of all short and long term debt.
current maturities, lines of credit, amounts
due to stockholders and related parties.
The sum of all interst bearing debt including both short and long term debt
Total Other Liabilities
Total Other Long Term Liabilities includes: Sum of all Other Long Term Liabilities.
Defered debt, interest & revenue, accrued
items and other miscellaneous long term
liabilities.
Simply the sum of other liabilities.
Total Long Term Liabilities Includes: Total Debt and Other Long Term Sum of Total Debt and Other Long Term
Liabilities.
Liabilities.
Simply the sum of all long term obligations
Total Liabilities
Simply the sum of all obligations.
Total Liabilities includes: All Current
Liabilities, Long Term Debt, and Long
Term Liabilities.
Sum of all Current and Long Term Debt
and Liabilities.
Ending Retained Earnings Retained Earnings for the end of a period. Beginning Retained Earnings net of
This is the cumulative sum of all earnings
Distributions & Dividends plus Net Income and losses of the company.
(Loss).
Total Equity
Total Equity
Sum of all Equity items plus Net Income
(Loss).
Simply the totoal of all equity accounts
Total Liabilities & Equity
Total Liabilities & Equity
Sum of all Liabilities plus Total Equity.
Simply a total of total equity and total
liabilities
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash and Liquidity Analysis
Receivable Turns (Sales /
Receivables)
Ratio of Sales to Receivables
Days Sales Outstanding
Ratio of sales to receivables converted to 365 days divided by the Receivable Turns
a number of days figure
ratio (Current period Sales (annualized for
the period) divided by Accounts
Receivable.)
Cash Collections
Total Cash collected through sales
Collections / Revenues (%) Cash Collections to Revenues
Current period Sales (annualized for the
period) divided by Accounts Receivable.
This ratio tells one how fast a company is
turning over their accounts receivable. A
ratio of 12 would mean they are collecting
their receivables in 1 month. This ratio
can be overstated if a significant portion
of the company’s sales are for cash as
these sales would not flow through
accounts receivable.
This is the same tool as Receivable turns
but converted to a day figure. The larger
the number of days the longer it takes a
company to collect its receivables. This
ratio should be compared to the actual
terms the company offers its customers to
see how well those customers pay their
invoices.
Current period Sales plus the change in
This calculation takes sales and then adds
Accounts Receivable since the last period. or subtracts the amount of change in
accounts receivable. The issue here is
that a sale is made but the actual cash is
not collected until the receivable is paid.
This becomes vitally important for fast
growing companies. They will continue to
have sales but their accounts receivables
will grow. The company will continue to
need cash to cover its payroll, additional
inventory to continue growing and rent.
These inflows and outflows could possibly
lead to cash shortfalls that will need to be
externally financed.
Cash Collections divided by Revenues.
This calculates the percentage of
revenues that are converted to cash
collections. A ratio of 1.00 would mean
that the company is collected 100% of
their revenue in the specific period.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash and Liquidity Analysis (continued)
Inventory Turnover
(COGS/Inventory)
Ratio of Cost of Goods Sales to Inventory Cost of Goods Sold (annualized for the
period) divided by Inventory.
This ratio describes the number of times a
year the company is turning over their
inventory. The larger the ratio the more
efficient the company is utilizing their
inventory. The faster a company can turn
over their inventory the less cash they
have tied up in inventory.
Days (on Hand) Inventory
Inventory turnover expressed in a number 365 days divided by Inventory Turnover
of days.
ratio (Cost of Goods Sold (annualized for
the period) divided by inventory.)
This ratio is similar to inventory turnover
but the result is expressed in days as
apposed to a number of times. A turnover
ratio of 12 would equate to 30 days in
inventory on hand. For some companies it
is easier to evaluate their inventory
efficiencies by thinking in days. They
often know how long a manufacturing
process takes or how long they want
something to sit on a shelf.
Inventory Purchases
Total Cash utilized for Inventory during the Ending Inventory plus Cost of Goods Sold This calculation yields the total inventory
period
minus Beginning Inventory.
purchased in the period. It takes the
beginning inventory plus all of the
inventory in COGS and then subtracts the
ending inventory. This represents all of
the inventory that flowed through the
company during a certain period. When
analyzing cash flow it helps identify what
amount of cash went toward inventory.
Operating Expenses Paid
on Terms
Operating Expenses Paid on Terms is
Selling, General & Administrative
selling, general & administrative expenses Expenses less Payroll & Benefits.
net of payroll and benefits expenses.
Total Purchases for A/P
Total Purchases for Accounts Payable.
This calculation is the total of all SG&A
expenses less payroll and benefits. It is
used in cash flow to highlight the nonpersonal expenses for a period.
Inventory Purchases plus Operating
This calculation highlights the total of all
Expenses Paid on Terms (Selling, General purchases that flow through accounts
& Administrative Expenses less Payroll & payable including inventory and SG&A
Benefits).
expenses.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash and Liquidity Analysis (continued)
Payables Turnover (COGS Ratio of Cost of Goods Sold to Accounts
/ Payables)
Payable.
Cost of Goods Solds (annualized for the
period) divided by Accounts Payable.
This calculates the number of times
accounts payable are turned over. It is
useful to compare this number to the
normal payment terms offered to this
company. A turnover figure of 12 would
mean a company is paying their payable in
roughly a month.
Days Payable
Payables Turnover ratio expressed in
terms of days.
365 days times (Accounts Payable divided This ratio is the same as payable turnover
by Cost of Goods Solds (annualized for
but the result is converted to days. It is
the period)).
helpful to compare this number of days to
the actual terms that are offered to the
company.
Cash Payments
Total cash outflow for inventory and
expenses.
Total Purchases for A/P plus change in
Accounts Payable since the last period.
This calculation highlights the total cash
paid out for Purchases for inventory &
SG&A expenses. It is similar to invntory
purchases but also includes the net
change in accounts payable. By including
the change in AP, any slowness or
prepayment in AP is accounted for when
evaluating cash flow.
Current Ratio
Ratio of Current Assets to Current
Liabilities.
Current Asset divided by Current
Liabilities.
This is a liquidity ratio which shows the
relationship of current assets (assets that
will be converted to cash over the coming
12 months - Inventory, accounts
receivable etc.) to Current Liabilities
(liabilities which will need to be paid in the
coming 12 months - accounts payable,
accrued expenses, line of credit, etc.). A
number less than one signals the
company will have difficulty meeting its
short term obligations.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash and Liquidity Analysis (continued)
Quick Ratio
Ratio of Cash & Accounts Receivables to (Cash plus Accounts Receivable) divided
Current Liabilities.
by Current Liabilities.
This ratio is similar to the current ratio but
only utilizes the most liquid assets cash
and accounts receivable. A ratio of over
one is considered strong highlighting that
cash and accounts receivable can cover
all current liabilities. Another way to
express this ratio is inventory reliance. A
ratio of less than one illustrates the
dependence on inventory conversion to
cash to satisfy current liabilities.
Working Capital
Balance of Current Assets less Current
Liablities.
This calculation shows how much in
current assets are left after the subtraction
of current liabilities. A larger number
illustrates the company's ability to cover
current liabilities and how much is
available to cover other longer term
liabilities. Now this calculation along with
current and quick ratio need to be
evaluated in the context of what makes up
each of the company's current assets and
current liabilities. If a company has long
payment from its suppliers 120 days and
turns its inventory over in 30 days then the
company can use these payment terms to
finance other assets such as building and
equipment. (An example would be WalMart).
AR / AP
Ratio of Accounts Receivable to Accounts Accounts Receivable divided by Accounts This ration highlights the relationship
Payable.
Receivable.
between accounts receivable and
accounts payable. A ratio of less than one
highlights that the company has more
payables than receivables. This could be
good or bad. If the company only sells for
credit, then it will have to pay its bills
before it receives the cash from
receivables. If a company has some
significant cash sales then this ratio is not
comparing apples to apples.
Current Assets minus Current Liabilities.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash and Liquidity Analysis (continued)
Cash / Current Liabilities
Ratio of Cash to Current Liabilities.
Cash divided by Current Liabilities.
Cash / Assets
Ratio of Cash to Total Assets.
Cash divided by Total Assets.
This highlights the cash coverage of
current liabilities. A higher number
signifies a lower dependence on the
conversion of accounts receivable and
inventory to cash to cover current
liabilities.
Simple a calculation to see how much of
total assets are cash. This ratio allows an
analyst to compare two companies of
different sizes.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash Flow Monthly
Depreciation &
Amortization
Total Depreciation & Amortization
Expense from sales and operations.
COGS Depreciation and Amortization plus This is simple the total of all depreciation
and amortization expense for the period
SG&A Depreciation and Amortization
Expense.
SGA - Depreciation &
Amortization
Total Depreciation and Amortization
Expense from Selling, General &
Administrative.
Total Depreciation and Amortization
Expense from SG&A.
This calculation allows one to compare
two different size companies with respect
to depreciation and saga.
(Increase) Decrease in
Current Assets
Change in Current Assets minus Cash
from prior year.
Change in Current Assets minus change
in Cash from prior year.
This calculation is used in cash flow
analysis. It analyzes the change in
primarily inventory, accounts receivable
and prepaid expenses. An increase in the
value signals that more cash it tied up in
those assets and the increase is
considered a use of cash. Subsequently,
a decrease would signal a source of cash
flow. As an example, if accounts
receivable increase then company's sales
were not all converted to cash and some
potential cash is tied up in accounts
receivable.
(Increase) Decrease in
Other Operating Assets
Change in Other Long Term Assets not
including Accumulated Amortization from
prior year.
Change in Other Long Term Assets minus
the change in Accumulated Amortization
minus the change in Accumulated
Amortization of Deferred Charges.
This calculation is used to calculate the
change in non-current and non-fixed
assets. In cash flow analysis it highlights
how much cash was utilized or created by
a change in other operating assets.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash Flow Monthly (continued)
Increase (Decrease) in
Current Operating
Liabilities
The change in Current Liabilities from the Current period [Ending Current Liabilities
prior year.
minus Short Term Debt minus Current
Maturities of LT Debt minus Lines of
Credit minus Dividends)] minus prior
period [(Ending Current Liabilities minus
Short Term Debt minus Current Maturities
of LT Debt minus Lines of Credit minus
Dividends)].
This calculation is used in cash flow
analysis. It analyzes the change in current
liabilities. An increase in current liabilities
signals that cash was gained by not
having to pay these liabilities. As an
example if the company increased its
accounts payable, then the company has
received assets namely inventory but has
not paid the invoice yet - therefore no use
of cash. If this was the only transaction in
the period, from a cash flow perspective
inventory increased (a use of Cash in cash
flow analysis) and accounts payable
increased (a source of cash in cash flow
analysis) the increase and decrease net to
zero. In reality, the company bought some
inventory but has not paid cash for it so
their was -0- change in cash.
Increase (Decrease) in
The change in Other Operating Liabilities
Other Operating Liabilities excluding Debt from the prior year.
Current period [(Beginning Other Current
Liability minus Deferred Debt minus
Deferred Interest)] minus prior period
[(Beginning Other Current Liability minus
Deferred Debt minus Deferred Interest)].
This calculation is used to calculate the
change in non-current liabilities and noninterest bearing debt. In cash flow
analysis it highlights how much cash was
utilized or created.
Capital Expenditures
Beginning Gross Fixed Assets minus
ending Gross Fixed Assets.
This marks the change in gross fixed
assets. It needs to be combined with the
corresponding Depreciation and
amortization adjustment to highlight the
actual amount of cash utilized on capital
expenditures. By combining this with the
depreciation and amortization adjustment,
and retirements in fixed assets are
accounted for accurately in the cash flow.
Change in Gross Fixed Assets from the
prior year.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash Flow Monthly (continued)
Net Financing Activities
(debt)
Change in debt from the prior year.
The change in Line of Credit, Short &
Long Term, Amounts Due From Officers,
Shareholders and Related Parties and
Deferred Debt.
This tells one the amount of additional
external financing that was taken on or
paid of by the company. This includes
interest bearing debt and excludes
operating liabilities such as accounts
payable and accrued expenses.
Net Capital Additions
Change in Profits minus change in
Dividends from the prior year.
This represents any additional equity
Change in Equity minus change in
Retained Earnings (Profits) minus change financing over and above income/loss for
in Dividends/Distributions (Dividends).
the period and distributions for the period.
Net Cash from Operating
Activities
Net cash flow generated by operating
activities.
Subtotal of Cash from Operating Activities. This represents the amount of cash flow
generated for a certain period by the
operations of the company. This
calculation can be both positive and
negative and will be influenced by
purchases in inventory and the collection
of receivable. A negative number for the
period means that the company is going to
need cash to cover the shortfall. This
could come from either cash in the bank or
from some external source. In the long
run, if a company does not have positive
cash flow from operations it will continually
need outside debt and/or equity to allow it
to continue operations.
Net Cash from Investing
Activities
Net cash flow generated or used by
investing activities, usually fixed assets.
Subtotal of Cash from Investing Activities. This represents the amount of cash flow
generated or consumed by investing
activities. Usually this highlights the
amount of fixed assets a company has
acquired for a given period. If the
company financed the acquisition then the
increase in debt will appear in the Net
Cash From Financing Activities.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Cash Flow Monthly (continued)
Net Cash from Financing
Activities
Net cash flow from debt and equity
financing.
Subtotal of Cash from Financing Activities. This represents the amount of cash flow
generated or consumed by financing
activities. If the company borrowed money
or issued new debt, it would appear here
as a positive or source of cash flow. If the
company paid off some debt of issued
dividends, it would appear here as a
negative or use of cash.
Net Increase (Decrease) in Net increase or decrease in cash for the
Cash
period.
Total of Cash from Operating, Investing, & This is the net change in cash for the
Financing Activities.
period.
Beginning Cash
Cash at the beginning of the period
Beginning Cash value.
Simply the beginning cash balance
Ending Cash
Cash at the end of the period
Ending Cash value.
Simply the ending cash balance
Depreciation Adjustment
Change in Accumulated Depreciation and The change in Accumulated Depreciation
Amortization outside of Depreciation
and Amortization for the period minus the
Expense from the prior year.
amount of Depreciation and Amortization
Expense for the same period.
Distributions/dividends/adju Amount of dividends distributed for the
stments
period.
In the cash flow statements this calculation
captures any changes in the accumulated
depreciation and amortization outside of
depreciation and amortization expense.
For example if a company retires a piece
of equipment, they would reduce both
fixed assets and depreciation. The
change in fixed assets will be captured in
capital expenditures and the change in
depreciation would be captured in this
account.
Change in Retained Earnings less change This represents the amount of dividends
in Dividends Payable.
or distributions for the period.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Leverage Ratios
Tangible Net Worth
Tangible Net Worth minus Net Intangible
Assets.
Total Equity minus Net Intangible Assets. This calculation takes total equity and
subtracts the total amount of intangibles.
The logic here is to look at the equity of
only the tangible hard assets. This is
primarily used in credit analysis to present
a more conservative view of equity.
Liabilities / Tangible Net
Worth
Ratio of Total Liabilities to Tangible Net
Worth.
Total Liabilities divided by Total Equity
This is a leverage ratio. This ratio
calculates the relationship between debt
and equity. A number of 2.5 means that
for every dollar in equity there is 2.5
dollars in debt. A company with higher
leverage has less financial flexibility
meaning that for every dollar the owner
has in the company, outside creditors
(banks, suppliers etc) have $2.5.
Liabilities /Tangible Net
Ratio of Total Liabilities to Tangible Net
Worth (Shareholder Loans Worth (Excluding Amounts Due to
as equity)
Shareholders)
Total Liabilities plus Amounts Due to
Another leverage ratio like liabilities to
Shareholders divided by Tangible Net
worth but this treats shareholder loans as
Worth less Amounts Due to Shareholders. equity instead of debt. If the owners have
put money into the company through loans
instead of equity, this is a way to show this
as equity from a leverage perspective.
Debt Ratio (Total Liabilities Ratio of Total Liabilities to Total Assets.
/ Total Assets)
Total Liabilities divided by Total Assets.
This ratio highlights the amount of the
asset that was financed by external
sources.
Total Debt / Equity
Ratio of Total Debt to Total Equity.
Total Debt divided by Total Equity. (Total
Debt includes: LT and ST debt, current
maturities, lines of credit, amounts due to
stockholders and related parties. Total
Equity includes: All equity items plus net
income.)
This is similar to the leverage ratio
liabilities to equity but this ratio only
includes interest bearing debt instead of
total liabilities. This is a common way for
banks to look at the leverage of a
company since they are usually the debt
holder.
Debt / Assets
Ratio of Total Debt to Total Assets.
Total Debt divided by Total Assets. (Total this is similar to liabilities to assets but
Debt includes: LT and ST debt, current
answers the question - what percent of
maturities, lines of credit, amounts due to assets are financed by debt.
stockholders and related parties).
Name
Description/Function
How is this calculated or used?
What does this tell me?
Leverage Ratios (continued)
Cash from Ops / Total Debt Ratio of Cash from Operations to Total
Debt.
Total Cash from Operations (annualized) this is a cash flow leverage ratio. It takes
divided by Total Debt. Total Debt includes: the annualized amount of cash flow the
LT and ST debt, current maturities, lines of company is generating and compares this
credit, amounts due to stockholders and to the total interesting bearing debt. A
related parties.
number of .25 means that at the
company's current cash flow level, it would
only be able to cover 25% of the
company's debt obligations. The larger
the percentage the less leveraged the
company's cash flow is.
Cash from Ops / Total
Liabilities
Total Cash from Operations (annualized)
divided by Total Liabilities.
Ratio of Cash from Operations to Total
Liabilities.
similar to Cash from Ops/Total debt but
total liabilities are used.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Coverage Ratios
Debt Coverage Ratio
Ratio of annualized Net Income plus
Depreciation & Amortization Current
Portion of Long Term Debt.
(Net Income plus Depreciation &
Amortization) (annualized for the period)
divided by Current Portion of Long Term
Debt.
this is a common bank coverage ratio. It
takes a simplified cash flow calculation (NI
+ Depreciation) and compares it to the
debt obligations due in the next 12
months. A number like 1.5 means that the
company can cover its current debt
obligations 1.5 times.
EBIT / Interest Coverage
Ratio of EBIT (Earnings Before Interest & EBIT (Earnings Before Interest & Taxes)
Taxes) to Interest Expense
divided by Interest Expense
This is another coverage ratio. It
highlights the amount of cash flow is
available to cover interest. A number less
than one means the company cannot even
cover interest and would be unable to
repay any principal.
EBITDA / Interest
Coverage
Ratio of EBITDA (Earnings Before
Interest, Taxes, Depreciation, &
Amortization) to Interest Expense
EBITDA (Earnings Before Interest, Taxes, Similar to EBIT/Interest but uses the
Depreciation and Amortization) divided by EBITDA cash flow metric.
Interest Expense.
Funded Debt
Interest Bearing Debt.
Funded Debt includes: Lines of Credit plus The sum of all interest bearing debt.
Short Term Debt plus Current Portion of
Long Term Debt plus Long Term Debt less
Amounts Due to Shareholders & Related
Parties.
Funded Debt / EBITDA
Ratio of Funded Debt to EBITDA
(Earnings Before Interest, Taxes,
Depreciation, & Amortization.
Funded Debt divided by EBITDA
(annualized for the period). (Funded debt
includes LT and ST debt, current
maturities, and lines of credit. EBITDA is
income calculated before interest, taxes,
depreciation and amortization.)
This is a ratio of debt to cash flow. A
number of 3 would mean that at the
company's current debt and cash flow
level, it would take the company 3 years to
repay it debt obligations. This calculations
is used to make sure a company's debt
level does not get too far ahead of it cash
flow.
Name
Description/Function
How is this calculated or used?
What does this tell me?
Financial Ratios
Return on Assets
ROA Ratio of Annualized Net Income to
Total Assets.
Net Income (annualized for the period)
divided by Total Assets.
The highlights the amount of profits the
company's assets generated.
Return on Equity
ROE Ratio of Annualized Net Income to
Total Equity.
Net income (annualized for the period)
divided by Total Equity.
This highlights the amount of profits the
company's equity generated.
Asset Turnover (Sales /
Assets)
Ratio of Annualized Total Revenue to
Total Assets.
Total Revenue (annualized for the period) This highlights the amount of sales the
divided by Total Assets.
company's assets generated. A number
of 2 would mean for every dollar in assets
the company generated $2 in sales. A
rising trend show the company is more
efficiently utilizing its assets.
Retained Earnings / Assets Ratio of Ending Retained Earnings to
Total Assets.
Retained earnings divided by assets
Simply Retained Earnings as a percentage
of assets.