Definitions of ratios



Q50. Definitions of ratios
What are the names of the following ratios?

(1) Net income / Sales
(2) Gross profit / Sales
(3) Net income / Average total assets
(4) Net income / Average stockholders’ equity
(5) Sales / Average total assets
(6) Cost of goods sold / Average inventory
(7) Credit sales / Average accounts receivable
(8) Credit purchases / Average accounts payable
(9) Current assets / Current liabilities
(10) (Current assets – Current liabilities) / Total assets
(11) Total liabilities / Total stockholders’ equity
(12) Total liabilities / Total assets

A50.
(1) Net income / Sales
= Profit margin ratio
(2) Gross profit / Sales
= Gross profit ratio
(3) Net income / Average total assets
= Return on assets (ROA)
(4) Net income / Average stockholders’ equity
= Return on equity (ROE)
(5) Sales / Average total assets
= Assets turnover ratio
(6) Cost of goods sold / Average inventory
= Inventory turnover ratio
(7) Credit sales / Average accounts receivable
= Accounts receivable turnover ratio
(8) Credit purchases / Average accounts payable
= Accounts payable turnover ratio
(9) Current assets / Current liabilities
= Current ratio
(10) (Current assets – Current liabilities) / Total assets
= Working capital ratio
(11) Total liabilities / Total stockholders’ equity
= Debt to equity ratio
(12) Total liabilities / Total assets
= Debt to assets ratio