Acid Test Ratio (Quick Ratio)
Cash + Accounts Receivable + Short-term Investments / Current Liabilities
The acid-test ratio is a strong indicator of whether a firm has sufficient short-term assets to cover its immediate liabilities.
Days Sales Outstanding
Accounts Receivable / (Annual Sales/365)
Measures the number of days it takes a company to collect cash from its sales. The sooner cash can be collected, the sooner this cash can be used for other operations. Both liquidity and cash flows increase with a lower days sales outstanding measurement.
Cost of Goods Sold (COGS)
Beginning Inventory + Purchases – Ending Inventory
The cost of goods sold is the cost of the merchandise that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income statement and can be considered as an expense of the accounting period.
Cost of Goods Sold / Average Inventory
The inventory turnover ratio is a key measure for evaluating just how efficient management is at managing company inventory and generating sales from it.
(Revenue-Cost of Goods Sold) / Revenue
Gross profit margin is a key measure of profitability by which investors and analysts compare similar companies and companies to their overall industry. The metric is an indication of the financial success and viability of a particular product or service.
The value of all assets that can reasonably expect to be converted into cash within one year.
A company’s debts or obligations that are due within one year.
Return on Assets (ROA)
Net Income / Total Assets
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings.
Cash + Marketable Securities / Current Liabilities
The cash ratio is almost like an indicator of a firm’s value under the worst-case scenario where the company is about to go out of business. This ratio tells creditors and analysts the value of current assets that could quickly be turned into cash, and what percentage of the company’s current liabilities these cash and near-cash assets could cover.