1, liquidity liquidity ratio is the company’s ability to generate cash, it depends on the recent changes in the amount of liquid assets to cash. (1) Current Ratio Formula: Current Ratio = Current Assets / Current Liabilities company set the standard value: 2 Meaning: short-term debt reflect the company’s ability to repay.

The more liquid assets, short-term debt less current ratio is larger, stronger corporate short-term solvency. Analysis showed: lower than normal, short-term corporate debt at higher risk. In general, business cycles, the amount of current assets in the accounts receivable and inventory turnover rate is the ratio of the major factors affecting liquidity.

(2) quick ratio formula: Quick Ratio = (Current Assets — Inventories) / Current Liabilities conservative quick ratio = 0.8 (short-term money funds + investment + net notes receivable + accounts receivable) / current liabilities Enterprises set the standard value: 1 meaning: more than the current ratio reflect the company’s ability to repay short-term debt.

Because current assets also include cash and may slow the depreciation of the inventory, it will be as current assets less inventories to current liabilities and then compared to assess the company’s short-term solvency. Analysis showed that: the quick ratio below 1 is generally considered low short-term solvency.

Affect the credibility of the quick ratio is an important factor in the liquidity of receivables, the carrying amount of the accounts receivable is not always realized, not necessarily very reliable. Liquidity of the total tips: (1) increased liquidity factors: You can use the bank loan indicator; ready soon realized the long-term assets; solvency reputation.

(2) reduced liquidity factors: not recorded any contingent liability; guarantee liability arising out of or contingent liabilities. 2, asset management ratio (1) inventory turnover formula: Inventory turnover ratio = cost of product sales / [(beginning inventory + ending inventory) / 2] set the standard enterprise value: 3 meanings: inventory turnover rate of inventory turnover rate key indicators.

Improving inventory turnover, reduce business cycle, can increase the liquidity of enterprises. Analysis showed that: inventory turnover rate reflects the level of inventory management, the higher the inventory turnover rate, inventory level, the lower the occupation, more liquid, stock converted to cash or receivables faster.

It not only affect the short-term solvency, but also an important part of the whole enterprise management. (2) Inventory turnover days formula: Inventory turnover days = 360 / inventory turnover = [360 * (beginning inventory + ending inventory) / 2] / product cost of sales companies set the standard value: 120 Meaning: Enterprise purchased inventory investment production to sale out the required number of days.

Improving inventory turnover, reduce business cycle, can increase the liquidity of enterprises. Analysis showed that: inventory turnover rate reflects the level of inventory management, faster inventory turns, inventory levels, the lower the occupation, more liquid, stock converted to cash or receivables faster.

It not only affect the short-term solvency, but also an important part of the whole enterprise management. (3) the definition of accounts receivable turnover: analysis of the specified accounts receivable into cash during the period the average number of times. Formula: Accounts receivable turnover ratio = sales / [(opening + closing accounts receivable accounts receivable) / 2] set the standard enterprise value: 3 meanings: the higher accounts receivable turnover ratio, indicating the recovery of faster.

On the contrary, shows too much slack in the working capital accounts receivable, the impact of normal cash flow and solvency. Analysis showed that: accounts receivable turnover ratio, mode of operation with the business combination to consider. The following situations can not use the index to reflect the actual situation: first, the seasonal operation of the enterprise; Second, extensive use of installment settlement; Third, extensive use of cash-settled sales; fourth, at the end of a large number of sales or end sales dropped significantly.

[Page] (4) the definition of accounts receivable turnover days: that companies from obtaining the right to recover accounts receivable amount, converted to cash by the time required. Formula: Accounts receivable turnover days = 360 / accounts receivable turnover ratio = (beginning + ending accounts receivable accounts receivable) / 2] / product sales company set the standard value: 100 meaning: accounts receivable The higher the turnover rate models, indicating faster recovery.

On the contrary, shows too much slack in the working capital accounts receivable, the impact of normal cash flow and solvency. Analysis showed that: accounts receivable turnover ratio, mode of operation with the business combination to consider. The following situations can not use the index to reflect the actual situation: first, the seasonal operation of the enterprise; Second, extensive use of installment settlement; Third, extensive use of cash-settled sales; fourth, at the end of a large number of sales or end sales dropped significantly.

(5) business cycle formula: business cycle = inventory turnover days + accounts receivable turnover days = ([(beginning inventory + ending inventory) / 2] * 360) / sales cost + ([(Beginning Accounts Receivable + Final Accounts Receivable) / 2] * 360) / product sales company set the standard value: 200 Meaning: business cycle is beginning to sell stock to obtain inventory and cash back up time.

Under normal circumstances, sales cycle is shorter, faster cash flow; business cycle is long, indicating slow turnover of funds. Analysis showed that: business cycle, generally should be combined with inventory turns and accounts receivable turnover analysis of the situation together. Length of sales cycle, not only reflected the level of enterprise asset management, will affect the solvency and profitability.

(6) mobile asset turnover formula: Mobile Asset Turnover = sales / [(Beginning the end of current assets + current assets) / 2] set the standard value of business: 1 sense: mobile asset turnover reflects the current assets turnover rate turnover faster, the relative savings will be liquid assets equal to expand the amount of investment, enhance profitability; the slow turnover rate, need to add liquidity to participate in working to form a waste of assets, lower corporate profitability.

Analysis showed that: mobile asset turnover to integrate inventory, accounts receivable were analyzed together, and reflect the profitability indicators used together, can fully evaluate the enterprise’s profitability. (7) Total Assets Turnover Formula: Total assets turnover = sales / [(opening + closing total assets total assets) / 2] set the standard business value: 0.

8 Significance: This indicator reflects the total assets turnover rate, turnover faster, indicating the stronger marketing capabilities. Enterprises can use puerile way, speed up asset turnover, profits increased in absolute terms. Analysis showed: total asset turnover ratio measures the use of corporate assets, the ability to make a profit.

Often reflect the profitability indicators used together, a comprehensive evaluation of business profitability. 3, debt ratio debt ratio reflects the debt and equity, the ratio of the net assets of relations. It reflects the company’s ability to pay long-term debt due. (1) gearing ratio formula: asset-liability ratio = (total liabilities / total assets) * 100% of companies set the standard value: 0.

7 Significance: reflect the creditors of the capital ratio of total capital. This indicator also known as the leverage ratio. Analysis showed that: the greater the debt ratio, the greater the financial risk facing enterprises, access to the stronger ability to profit. If the business lack of funds, relying on debt to maintain, resulting in particularly high debt ratio, debt risk should be special attention.

Asset-liability ratio of 60% -70%, more reasonable, prudent; up to 85% and above, should be considered as early warning signals, the enterprise should bring enough attention. (2) to equity ratio of the formula: equity ratio = (total liabilities / equity) * 100% [Page] companies set the standard value: 1.

2 Significance: creditors and shareholders to reflect the relative proportion of the capital. Reflect the company’s capital structure is reasonable and stable. Also shows that the capital invested by shareholders, creditors rights and interests of the level of protection. Analysis showed that: In general, high rate of property rights is a high risk, high reward of financial structure, ownership ratio, is low-risk, low-paid financial structure.

The shareholders, in times of inflation, corporate debt, losses and risks can be transferred to creditors; in the period of economic prosperity, leverage can get additional profits; in times of economic contraction, less debt to reduce interest burden and financial risk. (3) tangible net debt ratio formula: tangible net debt rate = [total liabilities / (Equity — Intangible assets net)] * 100% of companies set the standard value: 1.

5 Significance: equity ratio index extension, more cautious, conservative reflected in the corporate liquidation by creditors of equity capital into the level of protection. Not consider intangibles, including goodwill, trademarks, patents, and the value of non-patent technology, they may not be able to repay, as a precaution, can not be treated as debt.

Analysis showed that: a long-term solvency of view, a lower rate that those enterprises with good solvency, debt-scale normal. (4) interest earned multiple formula: interest earned ratio = EBIT / Interest expenses = (total profit + financial expenses) / (interest expense + financial costs capitalized interest) is usually used approximate formula: has been Interest cover = (gross profit + financial expenses) / finance charges companies to set the standard value: 2.

5 Significance: business business income and interest expense ratio, which measures the ability of companies to pay interest on loans, also called the interest coverage ratio. As long as interest coverage has been large enough, companies will have sufficient capacity to pay interest. Analysis showed that: large companies have enough interest profit before tax in order to ensure affordable and capitalized interest.

The higher the index, indicating the smaller company’s debt interest payments. 4, profitability ratio Profitability is the ability of companies to make profits. Whether investors or the debtor, are very concerned about this project. When the analysis of profitability, should exclude unusual items such as securities trading has been or will be stopped in Business, major accidents or legal changes and special projects, accounting policies and financial systems to bring the cumulative effect of change and other factors.

(1) Sales net profit margin formula: net profit margin = net sales / Sales * 100% of companies set the standard value: 0.1 Significance: This indicator reflects the sale of every dollar of revenue, net profit is. That the level of sales revenue. Analysis showed that: enterprises increase revenue, we must be appropriate to make more net profit margin of sale remain unchanged or increased.

Sales net profit margin can be broken down into sales margin, sales tax rate, cost of sales ratio, cost of sales ratio and other indicators during the analysis. (2) sales margin formula: sales gross margin = [(sales revenue — cost of sales) / Sales] * 100% of companies set the standard value: 0.15 meaning: that for every dollar sales after deducting cost of sales, how much money you can for the formation of the costs and profits during the period.

Analysis showed that: sales sales net interest margin is the first enterprise is based on sales is not large enough profit margin can not be formed. Regular analysis of sales gross profit enterprises, the enterprises, according to sales revenue, cost of sales ratio of the occurrence and to make judgments.

(3) net profit margin of assets (return on total assets) formula: Assets net profit margin = net profit / [(opening + closing total assets total assets) / 2] * 100% of companies set the standard values: the actual circumstances of significance: net profit of the enterprise a certain period compared with the company’s assets, utilization of corporate assets that effect.

The higher the index, indicating the higher efficiency of assets, that those enterprises to increase revenue and save money and achieved good results, or the opposite. [Page] analysis showed: Assets net profit margin is a comprehensive index. How much net income the amount of assets and businesses, assets structure, business management has a close relationship.

Affect the level of assets, net profit margin of reasons: the price of products, high and low unit costs, product production and sales volume, the size of the amount of funds used. Dupont system of financial analysis can be combined to analyze business problems. (4) return on equity (ROE) formula: ROE = net profit / [(opening + closing total equity total equity) / 2] * 100% of companies set the standard value: 0.

08 significancereturn on net assets of the company equity return on investment, also known as the net rate of return or interest rate of return, and highly integrated. Is the most important financial ratios. Analysis showed that: DuPont analysis system can be broken down into the indicators associated with a variety of factors, to further analyze the impact of all aspects of equity compensation.

Such as asset turnover, return on sales, equity multiplier. In addition, the use of the indicators, should be combined with the accounts receivable, Other receivables, prepaid expenses for analysis. 5, cash flow analysis cash flow statement of the main role is to: first, to provide the business cash flow situation; second, help to evaluate the quality of current earnings, the third to help evaluate the enterprise’s financial flexibility, the first Fourth, help to evaluate the mobility of enterprise; fifth, used to predict future cash flow business.

Flow analysis flow analysis is rapidly changing as the cash assets of the capacity. (1) Cash due debt ratio formula: cash due debt ratio = net cash flow from operating activities / current liabilities due within one year of current maturity of debt = long-term debt + maturing notes payable to set the standard corporate values: 1.

5 Significance: The net cash flow from operating activities and debt maturity more current can reflect the company’s ability to repay the debt due. Analysis showed: Enterprise can be used to repay debt refinance old debt than by, the general should be the cash inflow from operating activities to repay.

(2) Cash flow debt ratio formula: cash flow debt ratio = net cash flow from operating activities Year / end of current liabilities companies set the standard value: 0.5 Significance: cash generated from operating activities reflects the current liabilities on the level of protection. Analysis showed: Enterprise can be used to repay debt refinance old debt than by, the general should be the cash inflow from operating activities to repay.

(3) Cash total debt ratio formula: liabilities ratio = cash flow from operating activities net cash flow / total debt at end enterprise set standard value: 0.25 Meaning: Enterprise can be used to repay debts through a new addition to refinance old debt, the general should be is the cash inflow from operating activities to repay.

Analysis showed that: compared with the past results, and compared with the industry to determine the high and low. The higher this ratio, the capacity of enterprises, the stronger the assumption of debt. This ratio also demonstrated the greatest interest-bearing capability of enterprises. Ability to obtain cash (1) Cash Ratio formula sales: sales ratio = cash from operating activities net cash flow / sales company set the standard value: 0.

2 Significance: reflect sales per dollar of net cash inflows are, the better the value. Analysis showed that: compared with the past results, and compared with the industry to determine the high and low. The higher the ratio, better the quality of corporate income, capital utilization will be. (2) operating cash flow per share formula: Cash flow per share Operating cash flow from operating activities / number of ordinary shares [Page] number of ordinary shares from the company fill out the actual number of shares.

Enterprises set the standard value: According to the significance of the actual situation: operating earnings per share reflects the net cash received, the better the value. Analysis Note: This indicator reflects the company’s largest capacity distribution of cash dividends. Exceed this limit, we must borrow dividends.

(3) all the assets of the cash recovery rate formula: recovery = total assets in cash from operating activities net cash flow / total assets at end enterprise set the standard value: 0.06 Meaning: Description of enterprise assets ability to generate cash, the value the bigger the better. Analysis showed that: the countdown to the target request, you can analyze all of the assets with operating cash recovery, duration of need.

Therefore, this indicator reflects the meaning of corporate asset recovery. Shorter recovery period, indicating the current capacity of the assets was stronger. Financial flexibility analysis (1) cash to meet the investment ratio formula: ratio = cash to meet the investment management activities of the past five years, the cumulative net cash flow / capital expenditure over the same period, inventories increased cash dividends and.

Enterprises set the standard value: 0.8 to take a few methods: Over the past five years, the cumulative net cash flow from operating activities should refer to the first five years of operating activities and net cash flows; the same period, capital expenditures, inventories increased cash dividends and also from the cash Flow-related part to take a few, are taking the average of the last five years; capital expenditure, from the acquisition of fixed assets, intangible assets and other long-term assets in cash paid by check number; inventory increase, from Cash Flow Schedule take a few.

Reduce the field to take stock of the opposite of the increase in the number of the inventory; cash dividends, cash flow from the main table, the distribution of profits or dividends paid cash to take a few. If the introduction of the new enterprise accounting system, the project for the distribution of dividends, profits or payment of interest paid in cash, then take the number of way: the main table for distribution of dividends, profits or payment of cash interest paid minus the finance charges Schedule .

Meaning: Description of cash generated from operations to meet business capital spending, inventory and cash dividend increase capacity, the better the value. Ratio the greater the higher the rate of financial self-sufficiency. Analysis showed that: to 1, indicating that enterprises can get the cash operating funds needed to meet business expansion; if less than 1, it indicates some companies rely on external financing funds to supplement.

(2) Cash dividend coverage ratio formula: cash dividend coverage ratio = Operating cash flow per share / Dividend per share = Cash flow from operating activities net cash / cash-dividend company set the standard value: 2 significance: the larger the ratio, indicating cash dividend capacity is, the better the value.

Analysis Note: The results can be compared with the same industry, compared with the company in the past. (3) Operating index formula: Index = operating cash flow from operating activities / operation which should be in cash: cash from operations = net income + non-operating activities, cash on costs = net profit — investment income — operating income + operating expenses + current extraction of amortization of intangible assets + depreciation + amortization + deferred assets and prepaid expenses, amortization of business set the standard value: 0.

9 Significance: Analysis of accounting net income and cash flow ratio and to evaluate earnings quality. Analysis showed that: close to 1 indicating that companies can get cash to its operations should be in cash equal to the high earnings quality; if less than one, it indicates quality of corporate earnings are not good enough.