Current Ratio
$\frac{\text{Current Assets}}{\text{Current Liabilities}}$ |
Liquidity |
Measures short-term debt coverage. Benchmark $\ge 1.5$ to $2.0$. |
Quick (Acid-Test) Ratio
$\frac{\text{Cash} + \text{Mkt Securities} + \text{A/R}}{\text{Current Liabilities}}$ |
Liquidity |
Strict instant liquidity. Excludes slow-moving Inventory & Prepaids. Benchmark $\ge 1.0$. |
Working Capital
$\text{Current Assets} - \text{Current Liabilities}$ |
Liquidity |
Absolute dollar buffer protecting operations from immediate insolvency. |
Debt-to-Equity Ratio
$\frac{\text{Total Liabilities}}{\text{Total Stockholders' Equity}}$ |
Solvency |
Measures financial leverage. $> 2.0$ indicates heavy reliance on creditor financing. |
Gross Profit Margin
$\frac{\text{Gross Profit}}{\text{Net Sales}} \times 100$ |
Profitability |
Percentage of sales retained after paying the direct cost of inventory/goods sold. |
Profit Margin
$\frac{\text{Net Income}}{\text{Net Sales}} \times 100$ |
Profitability |
Bottom-line pennies of profit generated from every dollar of revenue. |