# Financial Ratios

**Financial Ratios**

**Short-term Solvency Ratios:**

**Current Ratio** = Current Assets / Current Liabilities

**Quick Ratio** = Current Assets – Inventory/ Current Liabilities

**Cash Ratio** = Cash / Current Liabilities

If business cash inflows get struck due to strike or some other un-foreseeable circumstances, interval measure ratio can be used to see how long the firm could continue its operations.

**Interval Measure** = Current Assets / Average Daily Operating Cost

** Long-term Solvency Ratios:**

**Total Debt Ratio**: Total Assets – Total Equity / Total Assets

**Debt – Equity Ratio** = (Total Debt) / (Total Equity)

**Equity Multiplier** = (Total Assets) / (Total Equity)

**Long Term Debt** = (Long Term Debt) / (Long Term Debt + Equity)

**Time Interest Earned Ratio** = EBIT/Interest

**Cash Coverage Ratio** = (EBIT + Depreciation)/Interest

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