The Metrics
Net Profit Margin
Net Pretax Profit ÷ Revenue
The bottom line -- the amount you have left after every other expense is taken out. (Sageworks adjusts the number so any extra funds the owners have taken out have been added back in.)
Gross Profit Margin
Gross Profit ÷ Revenue
Gross profit is your revenue minus what it costs to make your product.
EBITDA Margin
EBITDA ÷ Revenue
Many companies use this as a shorthand measure of cash flow. EBITDA is earnings before interest, taxes, depreciation, and amortization.
Return On Equity
Net Income ÷ Total Equity
The return your shareholders are getting on their investment
Return On Assets
Net Income ÷ Total Assets
Net income generated for each dollar of assets. It's especially relevant for capital-intensive industries, like manufacturing.
Interest Coverage Ratio
EBITDA ÷ Interest Expense
This ratio shows roughly how easily you can repay your debts.
Debt to Equity Ratio
Total Liabilities ÷ Total Equity
What you owe compared with what you own
Inventory Days
(Inventory ÷ Cost of Goods Sold) x 365
The amount of time it takes to convert inventory into sales
Accounts Payable Days
(Accounts Payable ÷ Cost of Goods Sold) x 365
The number of days, on average, you take to pay your bills
Accounts Receivable Days
(Accounts Receivable ÷ Sales) x 365
The number of days, on average, your customers take to pay you
Current Ratio
Total Current Assets÷Total Current Liabilities
The amount of cash (or assets that can be turned into cash) on hand
Quick Ratio
(Cash + Accounts Receivable) ÷ Total Current Liabilities
Similar to the current ratio, this is a good measure of a company's short-term cash position.
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