Financial Ratios
Short-term Solvency Ratios:
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = Current Assets – Inventory/ Current Liabilities
Cash Ratio = Cash / Current Liabilities
If business cash inflows get struck due to strike or some other un-foreseeable circumstances, interval measure ratio can be used to see how long the firm could continue its operations.
Interval Measure = Current Assets / Average Daily Operating Cost
Long-term Solvency Ratios:
Total Debt Ratio: Total Assets – Total Equity / Total Assets
Debt – Equity Ratio = (Total Debt) / (Total Equity)
Equity Multiplier = (Total Assets) / (Total Equity)
Long Term Debt = (Long Term Debt) / (Long Term Debt + Equity)
Time Interest Earned Ratio = EBIT/Interest
Cash Coverage Ratio = (EBIT + Depreciation)/Interest