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Financial Ratios

1. Liquidity Ratio- provides information about the company’s ability to meet its short-term financial obligations. They are

of particular interest to those extending short-term credit to the firm

a. Current Ratio- measures the company’s ability to pay short-term obligations.

Formula: Current Assets/ Current Liabilities

2007 2008 2009 2010 2011 2012


2.45 2.13 3.66

b. Quick Ratio- it is an alternative that measures the company’s liquidity but it does not include the

inventories.

Formula: Cash + Accounts Receivables / Current Liabilities

2007 2008 2009 2010 2011 2012


1.29 1.26 1

2. Efficiency Ratio- it indicates how efficiently the firm utilizes its assets. It is sometimes referred as to efficiency ratio.
a. Receivable Turnovers- it indicates how quickly the firm collects its accounts receivable.

Formula: Net Credit Sales/ Ave. Net Receivables

2007 2008 2009 2010 2011 2012

b. Average Collection Period- it shows the average day collection of Accounts Receivable.

Formula: 360/ Receivable Turnover Ratio

2007 2008 2009 2010 2011 2012

c. Payables Turnover- this ratio shows how many times in one accounting period the company turns

over its account payable to creditors.

Formula: Cost of Sales / Ave Accounts Payable


2007 2008 2009 2010 2011 2012

d. Days Payable Ratio- this ratio shows how many days it takes to pay accounts payable.

Formula: 360/ Payables Turnover Ratio

2007 2008 2009 2010 2011 2012

3. Financial Leverage Ratio- it provides an indication of the long-term solvency of a company. Unlike the liquidity ratios

that are concerned with short-term assets and liabilities, profitability ratio measure the extent to which the company is

using long-term debt.

a. Debt to Asset Ratio- measures a company’s financial risk by determining how much of the company’s

assets have been financed by debts.

Formula: Total Liabilities/ Total Assets


2007 2008 2009 2010 2011 2012
0.83 0.83 0.93

b. Debt to Equity Ratio- it indicates what proportion of equity and debt the company is using to finance

its assets.

Formula: Total Liabilities / Total Equity

2007 2008 2009 2010 2011 2012


4.98 4.91 14.27

4. Profitability Ratio- it measures the company’s ability to generate a return on its resources

a. Net Profit Margin- it shows how much net profit is derived from every peso of total sales.

Formula: Net Income/ Sales

2007 2008 2009 2010 2011 2012

0.03 0.01 0.03


b. Assets Turnover- measures the company’s efficiency at using its assets in generating sales

Formula: Net Sales/ Ave Assets

2007 2008 2009 2010 2011 2012


4.06 3.26 3.14

c. Return on Assets- it indicates how efficient the management is in using its assets to generate its

earnings.

Formula: Net Income/ Ave Assets

2007 2008 2009 2010 2011 2012


0.67 0.36 0.50