Discover the secrets of balance sheet analysis with these 5 key ratios!
1/5
Quick Ratio
🎯Goal: Check the solvency of a company and how fast can they repay their short term debts with their quick assets.
💡Formula: Quick Assets / Current Liabilities
(where Quick Assets = Current Assets - Inventory)
Quick Ratio
🎯Goal: Check the solvency of a company and how fast can they repay their short term debts with their quick assets.
💡Formula: Quick Assets / Current Liabilities
(where Quick Assets = Current Assets - Inventory)
2/5
Inventory Turnover
🎯Goal: Measure how many months of inventory do you have on your balance sheet.
💡Formula: Cost of Goods Sold / Average Inventory
Note: use the Cost of Goods Sold over the last 12 months and this ratio will measure how many months of inventory you have.
Inventory Turnover
🎯Goal: Measure how many months of inventory do you have on your balance sheet.
💡Formula: Cost of Goods Sold / Average Inventory
Note: use the Cost of Goods Sold over the last 12 months and this ratio will measure how many months of inventory you have.
3/5
Asset Turnover
🎯Goal: Check how much CAPEX are needed for each $ earned. The higher the number, the less assets you need to make revenues.
💡Formula: Turnover / Net Tangible Assets
Asset Turnover
🎯Goal: Check how much CAPEX are needed for each $ earned. The higher the number, the less assets you need to make revenues.
💡Formula: Turnover / Net Tangible Assets
4/5
Cash Conversion Cycle (CCC)
🎯Goal: check how many days you need to convert your cash out (for inventory in cash in (from sales)
💡Formula: Days of Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Cash Conversion Cycle (CCC)
🎯Goal: check how many days you need to convert your cash out (for inventory in cash in (from sales)
💡Formula: Days of Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Let me know which ratio you think is the most important when you look at a Balance Sheet
RT and follow for more valuable KPIs
RT and follow for more valuable KPIs
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