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Financial Ratios

(SEB)


Liquidity Measurement Ratios

Current Ratio CurrentAssetsCurrentLiabilities\dfrac{Current Assets}{Current Liabilities} 3.86 A current ratio of 1.0 or greater is an indication that the company is well-positioned to cover its current or short-term liabilities.
Quick Ratio CashandCashEquivalents+ShortTermInvestments+AccountReceivablesCurrentLiabilities\dfrac{Cash and Cash Equivalents + Short-Term Investments + Account Receivables}{Current Liabilities} 2.65 The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which generally are more difficult to turn into cash. A higher quick ratio means a more liquid current position.
Cash Ratio CashandCashEquivalentsTotalCurrentLiabilities\dfrac{Cash and Cash Equivalents}{Total Current Liabilities} 0.25 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.
Days of Sales Outstanding (AccountReceivable(start)+AccountReceivable(end))/2Revenue/365\dfrac{(Account Receivable (start) + Account Receivable (end))/2}{Revenue/365} -49.09 DSO tells you how many days after the sale it takes people to pay you on average.
Days of Inventory Outstanding (Inventories(start)+Inventories(end))/2COGS/365\dfrac{(Inventories (start) + Inventories (end))/2}{COGS/365} 30.55 DIO tells you how many days inventory sits on the shelf on average.
Operating Cycle DSO+DIO\dfrac{DSO + DIO}{} - (DSO + DIO )Basically the Operating Cycle tells you how many days it takes for something to go from first being in inventory to receiving the cash after the sale.
Days of Payables Outstanding (AccountsPayable(start)+AccountsPayable(end))/2COGS/365\dfrac{(Accounts Payable (start) + Accounts Payable (end))/2}{COGS/365} 13.20 DPO tells you how many days the company takes to pay its suppliers.
Cash Conversion Cycle DSO+DIODPO\dfrac{DSO + DIO − DPO}{} - The cash conversion cycle (CCC = DSO + DIO – DPO) measures the number of days a company's cash is tied up in the production and sales process of its operations and the benefit it derives from payment terms from its creditors. The shorter this cycle, the more liquid the company's working capital position is. The CCC is also known as the "cash" or "operating" cycle.