Financial Ratıos

SUMMARY OF FINANCIAL RATIOS

|Ratio |Method of Computation |Significance |

|Liquidity: | | |

|Current |Current assets |Measures short-term liquidity, the ability of a firm |

| |Current liabilities |to meet needs for cash as they arise. |

|Quick or |Current assets – inventory |Measures short-term liquidity more rigorously than the|

|acid-test |Current liabilities |current ratio by eliminating inventory, usually the |

| | |least liquid current asset. |

|Cash flow |Cash + marketable securities |Measures short-term liquidity by considering as cash |

|liquidity |+ cash flow from operating activities |resources (numerator) cash plus cash equivalents plus |

| |Current liabilities |cash flow from operating activities. |

|Average |Net accounts receivable |Indicates days required to convert receivables into |

|collection |Average daily sales |cash. |

|period | | |

|Days inventory |Inventory |Indicates days required to sell inventory....