Category

Formula

Profitability

Gross profit margin

(Revenue - Cost of Goods Sold) / Revenue

Higher margins and returns generally indicate a more profitable and efficient business.

Operating profit margin

Operating Income / Revenue

Net profit Margin

Net Income / Revenue

Return on assets (ROA)

Net Income / Average Total Assets

Return on equity (ROE)

Net Income / Average Shareholders' Equity

Liquidity

Current ratio

Current Assets / Current Liabilities

A higher ratio suggests that the company has enough liquidity to cover its near-term liabilities.

Quick ratio

(Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Solvency

Debt-to-equity ratioHyderabad Wealth Management

Total Liabilities / Total Shareholders' Equity

These ratios measure a company's ability to meet its long-term debt obligations. Lower debt ratios and higher interest coverage ratios generally indicate a more financially stable company.

Debt-to-assets ratio

Total Liabilities / Total Assets

Interest coverage ratio

Operating Income / Interest Expense

Efficiency

Asset turnover ratio

Revenue / Average Total Assets

These ratios measure how effectively a company manages its assets to generate sales. Higher turnover ratios suggest that the company is using its assets more efficiently to generate revenue.

Inventory turnover ratio

Cost of Goods Sold / Average Inventory

Receivables turnover ratioLucknow Investment

Revenue / Average Accounts Receivable

Valuation

Market Price per Share / Earnings per Share

Lower ratios may indicate that the stock is undervalued, while higher ratios may suggest that it is overvalued.

Price-to-book (P/B) ratio

Market Price per Share / Book Value per ShareUdabur Stock

Price-to-sales (P/S) ratio

Market Price per Share / Revenue per Share

Dividend yield

Annual Dividends per Share / Market Price per Share