Four Primary Categories of Ratios | 1. Profitability Ratios2. Asset Utilization Ratios3. Liquidity Ratios4. Debt Utilization Ratios |

Profitability Ratios (Types) | 1. profit margin2. return on assets (investment)3. return on equity |

Asset Utilization Ratios (Types) | 4. receivable turnover5. average collection period6. inventory turnover7. fixed asset turnover8. total asset turnover |

Liquidity Ratios (Types) | 9. current ratio10. quick ratio |

Debt Utilization Ratios (Types) | 11. debt to total assets12. times interest earned13. fixed charged coverage |

Profitability Ratios | – allows us to measure the ability of the firm to earn an adequate return on sales, total assets, and invested capital |

Asset Utilization Ratios | – measures the speed at which the firm is turning over accounts receivable, inventory, and longer-term assets- measure how many times per year a company sells its inventory or collects all of its accounts receivable- for long-term assets, the utilization ratio tells us how productive the fixed assets are in terms of generating sales |

Liquidity Ratios | – the primary emphasis moves to the firm’s abilities to pay off short-term obligations as they come due |

Debt Utilization Ratios | – the overall debt position of the firm is evaluated in light of its asset base and earning power |

Profit Margin Ratio | net income divided by sales |

Return on Assets (Investment) | net income divided by total assets |

Return on Equity | net income divided by stockholder’s equity |

Du Pont System of Analysis | return on assets (investment) = profit margin x asset turnover |

Receivables Turnover | sales (credit) divided by receivables |

Average Collection Period | accounts receivable divided by average daily credit sales |

Inventory Turnover | sales divided by inventory |

Fixed Asset Turnover | sales divided by fixed assets |

Total Asset Turnover | sales divided by total assets |

Current Ratio | current assets divided by current liabilities |

Quick Ratio | current assets minus inventory divided by current liabilities |

Debt To Total Assets | total debt divided by total assets |

Times Interest Earned | income before interest and taxes divided by interest- indicates the number of times that income before interest and taxes covers the interest obligation |

Fixed Charge Coverage | income before fixed charges and taxes divided by fixed charges – measures the firms ability to meet all fixed obligations rather than interest payments alone |

Trend Analysis | an analysis of performance that is made over a number of years in order to ascertain significant patterns |

Inflation | prices increasing with the passing of time |

Replacement Cost | – the cost of replacing the existing asset base at current prices as opposed to original cost |

Categories