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Part 3: Financial ratios using income statement amounts

Ratio #6 Gross margin (gross profit percentage)

Ratio #7 Profit margin
Ratio #8 Earnings per share
Ratio #9 Times interest earned (interest coverage ratio)
Part 4: Financial ratios using amounts from the balance sheet and the income statement

Ratio #10 Receivables turnover ratio

Ratio #11 Days' sales in receivables (average collection period)
Ratio #12 Inventory turnover ratio
Ratio #13 Days' sales in inventory (days to sell)
Ratio #14 Return on stockholders' equity
Part 5: Financial ratios using cash flow statement amounts

Ratio #15 Free cash flow

Part 5 also includes a discussion of vertical analysis (resulting in common-size income statements and balance sheets) and horizontal analysis (resulting in comparative financial statements and trends over longer time periods).

Part 6 will give you practice examples (with solutions) so you can test yourself to see if you understand what you have learned. Calculating the 15 financial ratios and reviewing your answers will improve your understanding and retention.