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d. Inventory turnover ratio
Inventory turnover indicates the relative liquidity of
inventories, as
measured by the number of times a firm’s
inventories are replaced
during the year.
Inventory turnover =
2. Profitability Ratio
a. Return on Investment (ROI)
Return on Investment indicates the effectiveness of
management at generating operating profits on the firm’s
assets, as measured by operating profits relative to the total
assets.
Return On Investment =
b. Return On Equity (ROE)
Return On Equity indicates the accounting rate of return on the
stockholder’s investment, as measured by net income relative
to common equity.
Return on Equity =
c. Profit Margin
Profit margin indicates management’s effectiveness in
managing the firm’s income statement, as measured by
operating profits relative to sales
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