Ratio Analysis

Following are some of the common balance sheet and income statement ratios used to review the viability of a company. In reviewing the business plan, bankers and investors would look at these ratios to determine if they are going to make a loan or invest in the company. Ratios are only one tool used to evaluate a company. Each company is reviewed based on its own financial statements.

The industry numbers list at the right are the median for companies with under $2 million of assets for Standard Industrial Code #2011, Meat Packing. Use these numbers to compare to your ratios. Differences should be explainable.

Ratio Analysis Worksheet
                                                                                                         

Year
 20__    

Year
20__    

Year
20__   

Industry
Standard  

Liquidity Ratios
1. Current Ratio         Current Assets/
Current Liabilities		                                

       1.3  

2. Quick Ratio Cash + Accts Receivable/
Current Liabilities

 0.9

Safety Ratio
3. Debt to Equity               Total Liabilities/Equity                                                                 2.4
Profitability Ratios
4. Gross Profit Ratio
(margin)		 Gross Profit/
Sales

        %

      %

      %

   18.1%

5. Operating Ratio Income from Operations/
Sales

%

%

%

2.10%

6. Pretax Ratio Pretax Sales/
Profit

%

%

%

1.60%

Operating Performance Ratios
7. Sales to Assets Sales/
Total Assets		                                      

         4.4

8. Returns to Assets Pretax Profit/
Total Assets

%

%

%

3.80%

9. Return to Equity Pretax Profit/
Equity

%

%

%

7.40%

10. Inventory Turnover Cost of Goods Sold/Inventory

X

X

X

21.9

11. Inventory Turnover Days 365/
Inventory Turnover

days

days

days

17 days

12. Accounts Receivable Turnover Sales/
Accts Receivable

X

X

X

21.9

13. Collection Period 365/
A/R Turnover

days

days

days

17 days

14. Accounts Payable Turnover

Cost of Goods Sold/
Accts Payable

X

X

X

36.3

15. Accounts Payable Days 365/
A/P Turnover

days

days

days

10 days