< 1 min read## Concept Title: Ratios – Quick Reviews

It’s important to understand the different categories of ratios. It is the combined knowledge of all the groups of ratios that help in constructing an overall financial picture.

We will be using the following ratios to calculate the financial health of ODP. The main categories of ratios are:

**Liquidity Ratios**

**Ratio** | **Formula** |

Current Ratio | Current Assets/Current liabilities |

Quick or Acid-Test Ratio | (Current Assets – Inventories)/ Current Liabilities |

**Ratio** | **Formula** |

Debt to Equity Ratio | (Current + Long-term liabilities)/ Stockholders Equity |

Debt to Assets Ratio | Total Debts/ Total Assets |

Times Interest Earned Ratio | EBIT/Interest Charge |

Fixed Charge Coverage Ratio | (EBIT + Lease Payments + Rentals)/ (Interest + Lease payments + Rentals) |

**Productivity or Turnover Ratios**

**Ratio** | **Formula** |

Inventory turnover | Sales/Average Inventory of Finished Goods |

Fixed Asset turnover | Sales/Fixed Assets |

Total Asset Turnover | Sales/Total Assets |

Average Collection period | Accounts Receivable/(Total Credit Sales/365) |

Accounts receivable Turnover | Annual Credit Sales/Accounts receivable |

**Ratio** | **Formula** |

Gross profit margin | Gross profit/Sales |

Operating profit margin | Operating profit/Sales |

Net profit margin | Net Income/Sales |

Return on Assets | Net Income/Assets |

Return on Equity | Net Income/ Equity |

Basic earning power ratio | EBIT/Total Assets |