Accounting Ratios

 GP%

Operating Profit % 

Net Income %

ROA

ROE

Inventory Days

Receivable Days

Payable days

Debt to Equity Ratio

Interest Coverage

Current Ratio

Quick Ratio

Sure, I can explain these financial ratios:

GP% - Gross Profit Margin Percentage: This measures the percentage of revenue that remains after deducting the cost of goods sold. It is calculated by subtracting cost of goods sold from revenue and then dividing the result by revenue.

Operating Profit % - Operating Profit Margin Percentage: This measures the percentage of revenue that remains after deducting both cost of goods sold and operating expenses. It is calculated by subtracting cost of goods sold and operating expenses from revenue and then dividing the result by revenue.

Net Income % - Net Profit Margin Percentage: This measures the percentage of revenue that remains after deducting all expenses, including interest and taxes. It is calculated by subtracting all expenses from revenue and then dividing the result by revenue.

ROA - Return on Assets: This measures the profitability of a company in relation to its total assets. It is calculated by dividing net income by total assets.

ROE - Return on Equity: This measures the profitability of a company in relation to its shareholder equity. It is calculated by dividing net income by shareholder equity.

Inventory Days: This measures the average number of days it takes a company to sell its inventory. It is calculated by dividing the average inventory by cost of goods sold per day.

Receivable Days: This measures the average number of days it takes a company to collect payment from its customers. It is calculated by dividing the average accounts receivable by revenue per day.

Payable Days: This measures the average number of days it takes a company to pay its suppliers. It is calculated by dividing the average accounts payable by cost of goods sold per day.

Debt to Equity Ratio: This measures the amount of debt a company has in relation to its shareholder equity. It is calculated by dividing total liabilities by shareholder equity.

Interest Coverage: This measures a company's ability to meet its interest payments on debt. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Current Ratio: This measures a company's ability to meet its short-term obligations. It is calculated by dividing current assets by current liabilities.

Quick Ratio: This measures a company's ability to meet its short-term obligations using its most liquid assets. It is calculated by subtracting inventory from current assets and then dividing the result by current liabilities.

Give the formulas

Sure, here are the formulas for the financial ratios I mentioned earlier:

Gross Profit Margin Percentage (GP%) = (Revenue - Cost of Goods Sold) / Revenue x 100

Operating Profit Margin Percentage (Operating Profit %) = (Revenue - Cost of Goods Sold - Operating Expenses) / Revenue x 100

Net Profit Margin Percentage (Net Income %) = (Revenue - All Expenses) / Revenue x 100

Return on Assets (ROA) = Net Income / Total Assets

Return on Equity (ROE) = Net Income / Shareholder Equity

Inventory Days = (Average Inventory / Cost of Goods Sold per day)

Receivable Days = (Average Accounts Receivable / Revenue per day)

Payable Days = (Average Accounts Payable / Cost of Goods Sold per day)

Debt to Equity Ratio = Total Liabilities / Shareholder Equity

Interest Coverage = Earnings Before Interest and Taxes (EBIT) / Interest Expenses

Current Ratio = Current Assets / Current Liabilities

Quick Ratio = (Current Assets - Inventory) / Current Liabilities

Note that these formulas are just the basic versions of the ratios and may be slightly modified based on specific circumstances or requirements.

To find payable days do I have to consider total liability or just account payables

To calculate payable days, you would typically use only the accounts payable amount. This is because the payable days ratio is specifically intended to measure how long it takes a company to pay its suppliers, and accounts payable represents the outstanding payments owed to those suppliers.

The formula for payable days is:

Payable Days = (Average Accounts Payable / Cost of Goods Sold per day)

So you would use the average accounts payable balance for the period you're interested in, divided by the average cost of goods sold per day. The cost of goods sold is used because it represents the amount of inventory purchased during the period, which is typically the main driver of accounts payable.

Using the total liability instead of accounts payable may not accurately reflect how quickly the company is paying its suppliers, since total liabilities includes other types of debt and obligations, such as loans, interest, and taxes.

Current liabilities formula

The formula for current liabilities is:

Current Liabilities = Short-term Debt + Accounts Payable + Accrued Expenses + Taxes Payable + Other Short-term Liabilities

Current liabilities are the company's obligations that are due within one year or less, and they include things like accounts payable (i.e., the money owed to suppliers for goods and services received but not yet paid for), short-term debt, accrued expenses (e.g., wages and salaries owed but not yet paid), taxes payable, and other short-term liabilities.

This formula adds up all of the company's current liabilities to arrive at the total amount of money that it owes to its creditors and other short-term obligations that are due in the near term. It's an important measure of a company's short-term financial obligations and is used in calculating liquidity ratios such as the current ratio and quick ratio.

Do long-term loan include current liabilities

No, long-term loans are not included in current liabilities. Current liabilities are the company's short-term financial obligations that are expected to be paid off within a year, whereas long-term loans are debts with repayment terms longer than one year.

Examples of long-term loans include bonds, notes payable, and mortgages. These loans are typically used to finance long-term investments such as real estate, equipment, or major projects that are expected to generate cash flows over several years.

Long-term loans are generally not included in the calculation of current ratios, quick ratios, or other liquidity ratios that measure a company's ability to meet its short-term obligations. Instead, they are included in the calculation of solvency ratios that assess the company's long-term financial stability and ability to repay its debts over an extended period of time.