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# Common financial ratios

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Examples and descriptions of 7 common financial ratios

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1) Current Ratio: the relation of a company's current assets to its current liabilities; calculated by dividing current assets by current liabilities. "Current" means assets that will be used within a year. Does not include fixed assets and long term loans. I will assume "Bank" means long-term bank loans secured by a mortgage or something like that. If it means short-term loans less than a year, then it should be included. "Stock" probably means inventory.
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<br><br>'Stock' + 'Debtors' (accounts receivable) / 'Creditors' (accounts payable)=
<br><br>Greenyards 2001: 70/20
<br><br>Greenyards 2002: 90/20
<br><br>2002 improved over 2001, less chance of failing to pay creditors.
<br><br>Poynder 2001: 27/20
<br><br>Poynder 2002: 20/20
<br><br>2002 worse than 2001: Too much debt and must be covered by immediate profits.
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<br><br>2) Accounts receivable turnover: divide net annual sales by average accounts receivable balance for the year. Sales / 'Debtors'
<br><br>Greenyards 2001: 500/20
<br><br>Greenyards 2002: 610/30
<br><br>2002 is ...

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Examples and descriptions of 7 common financial ratios

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