Click Ratio Name For More Information

• Current Ratio
• EBIT / Interest
• Sales / Receivables
• Sales / Net Fixed Assets
• Cost of Sales / Inventory
• Quick Ratio
• Debt / Worth
• Sales / Working Capital
• Cost of Sales / Payables
• Depreciation / Net Sales
• Officers & Owners Salaries / Net Sales
• Fixed Assets / Tangible Net Worth
• % Profit Before Taxes / Tangible Net Worth
• % Profit Before Taxes / Total Assets
• Net Profit + Depreciation / Current Portion Long Term Debt

Net Profit + Depreciation /
Current Portion Long Term Debt

What it measures

This ratio measures the ability of your company to make principal payments on debt from current cash flow.  It is also an indicator of whether the company can take on more debt.

How is the ratio calculated

Divide (net profit + depreciation) by the current portion of the long term debt.  For example, if your net profit is 30,000 and the depreciation for the year is 10,000 and the current part of the long term debt is 15,000 then the ratio is calculated

        (30,000 + 10,000)
        ------------------- = 2.67
                15,000     

Target

The target for this ratio is 2.75

How to improve the ratio

Pay down your debt.  This can help if you ever need to borrow in the future.