Financial Performance Measurement (Ratios)

Profitability ratio
Types	Formula
Gross profit margin	Gross profit / Sales * 100%
Net profit margin	Net profit / Sales * 100%
Return on capital employed (ROCE)	PBIT / Capital employed * 100%
Asset turnover	Sales / Capital employed

※PBIT = Operating Profit

 

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Liquidity Ratio (measure business sustainability)
Types	Formula
Current ratio	Note 1
Quick ratio	Current assets - inventory / current liabilities

Note 1

Current assets / Current liabilities

>1: Healthy cash position

<1: Poor cash position

 

 

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Risk Ratio
Types	Formula
Interest cover	PBIT / Interest cost
Gearing ratio	Note 2

※PBIT = Operating Profit

 

Note 2 

Financial gearing (financial risk)

Debt / Equity * 100%

Debt / Debt + Equity * 100%

 

Operational gearing (business risk)

Contribution / PBIT * 100%

Fixed cost / Total costs * 100%

 

※ The lower gearing ratios are, the lower risks are 

 

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Managemnt efficiency
Types	Formula
Receivables collection period	Receivables / Credit sales * 365 days
Inventory holding period	Inventory / COGS * 365 days
Payables payable period	Payables / Credit purchases * 365 days

 

Receivables collection period

• How many days customers take to pay an entity 
• The shorter collection days from customers are, the more liquid working capitals are

 

Inventory holding period

• How many days the business holds inventories until they are sold
• The shorter inventory holding days by an entity is, the more good inventory management is

 

Payables payable period

• How many days a company takes to pay its suppliers
• The number of days increases, the company is paying its suppliers more slowly and may be an indicator of worsening financial condtion