Financial Ratios

Overview

By leveraging our normalized data, our financial institutions can access auto-calculated metrics and ratios to assess the financial performance of their businesses. Forget the paperwork or manual entry — expanded financial ratios allow for quick access to insights on your business customers.

How it Works?

The /financialRatios endpoint gives Railz's customers the ability to generate insights and make better-informed decisions.

Railz currently provides the following financial ratios based on the normalized financial statements:

What ratios & metrics are available?

The following table lists which ratios and metrics are supported and what they mean.

Ratio / Metric

Description

Distance to Default

Distance to default determines the level of default risk. This key ratio compares the business' net worth to its volatility.

Probability of Default

Probability of defautlt (PD) is the likelihood that a business will fail to pay back a debt over a specified period, usually one year. It can be applied to a variety of different risk management or credit analysis scenarios.

Liquidation Value

Liquidation value refers to the worth of a business when the assets of the business are sold. In other words, liquidation value refers to the estimated amounted of money received when its assets are sold and its debts paid. This value is often stated on a per share basis.

Average Collection Period

Average collection period is the amount of time it takes for a business to receive payments owed by its customers in terms of accounts receivable (AR). Businesses use the average collection period to make sure they have enough cash on hand to meet their financial obligations.

Gross Burn Rate

Gross burn rate is a business' operating expenses. It is calculated by summing all its operating expenses such as rent, salaries, and other overhead, and is often measured on a monthly basis. It also provides insight into a businesses cost drivers and efficiency, regardless of revenue.

Inventory Turnover

The inventory turnover ratio is the number of times a business has sold and replenished its inventory over a specific amount of time. The formula can also be used to calculate the number of days it will take to sell the inventory on hand.

Receivables Turnover

The receivables turnover ratio is used to measure how effective a business is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Payables Turnover

The payables turnover ratio refers to the ability of a business to pay off its accounts payable by comparing net credit purchases to the average accounts payable during a period.

Asset Turnover

The asset turnover ratio measures the efficiency with which a business uses its assets to produce sales.

Payables Conversion Period

The payables conversion cycle is a metric that expresses the time (measured in days) it takes for a business to convert its investments in inventory and other resources into cash flows from sales. It is used to measure how long each net input dollar is tied up in the production and sales process before it gets converted into cash received.

Accounts Payable Turnover Ratio

The accounts payable turnover ratio is a short-term liquidity measure used to quantify the rate at which a business pays off its short-term debts. Accounts payable turnover shows how many times a business pays off its accounts payable during a period.

Average Days Payable

Days payable outstanding is used to measure the average time (in days) that a business takes to pay its bills and invoices to its trade creditors.

Average Days Sales Outstanding

Days sales outstanding is the average number of days taken by a business to collect payment from their customers after the completion of a sale.

Average Outstanding Payables Balance

The average outstanding payables balance is the total money a company owes to suppliers who have extended credit to the company.

AR Turnover Ratio

The accounts receivable turnover ratio is used to quantify how well a business is managing the credit that they extend to their customers by evaluating how long it takes to collect the outstanding debt throughout the accounting period.

Equity to Long-Term Material Assets

An equity / long-term assets are assets that are not expected to be converted to cash or be consumed within one year (or operating cycle) of the date shown in the heading of the balance sheet.

Short-term Debt to Equity

Compares a business' short term liabilities to its shareholder equity and can be used to evaluate how much leverage a business is using.

Debt to Equity

The debt to equity (D/E) ratio is used to indicate the relative proportion of shareholders' equity and debt used to finance a business' assets. It is calculated by dividing a business’s total liabilities by its shareholder equity.

Interest Coverage Ratio

The interest coverage ratio is a debt and profitability ratio used to determine how easily a business can pay interest on its outstanding debt. It may be calculated as either EBIT or EBITDA divided by the total interest expense.

Debt to Asset Ratio

The debt to asset ration is a measure of the business' assets that are financed by debt rather than equity.

Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) is used to measure the ability of a business to use its operating income to repay all its debt obligations, including repayment of principal and interest on both short-term and long-term debt.

Interest Charges to Bank Loans

Interest charges to bank loans is an amount of money loaned at interest by a bank to a borrower, usually on collateral security, for a certain period of time.

Leverage Index

The leverage index is a ratio that measures the proportion of a business' debt compared to its equity that is used to make money and produce income. It is a gauge used to determine how good or bad a business is utilizing its debts

Quick Ratio

The quick ratio (also referred to as the acid test ratio) is used to measure a business' ability to pay down its current liabialities with its most liquid assets.

Absolute Liquidity

Absolute Liquidity ration measures the total liquidity available to the business. This ratio only considers marketable securities and cash available to the business.

Current Ratio

The current ratio measures a business' ability to pay short-term obligations or those due within one year.

Gross Burn

Gross burn is a calculation of outgoing cash, combining all of your monthly expenses as found on your income statement to determine your burn rate.

Runway

Runway refers to the amount of time a business has before it runs out of cash. Runway is calculated by dividing total cash in the founder's bank accounts by the Net Burn.

Cash Ratio

The cash ratio is metric that indicates a business' capacity to pay off short-term debt obligations with its cash and cash equivalents. Only cash and cash equivalents are used in the calculation.

Free Cashflow Ratio

The free cash flow ratio is used to calculate the how much more cash a business generates than it uses to run and expand the business by subtracting the capital expenditures from the operating cash flow. It is the excess money a business produces after it pays all of its operating expenses and CAPEX.

Debt to Enterprise Value

The debt to enterprise value (D/EV) ratio is used to indicate how leveraged the business is relative to its value.

Enterprise Value

Enterprise value (EV) is a measure of a business' total value. EV includes in its calculation the market capitalization of a business, short-term and long-term debt, as well as any cash on the business' balance sheet. Enterprise value is a popular metric used to value a business for a potential takeover.

Return on Assets

Return on assets is used to measure the profitability of a business in relation to its total assets. This ratio indicates how well or poorly a business is performing by comparing the profit (net income) it’s generating to the capital it’s invested in assets. The higher the return, the more productive and efficient management is in utilizing economic resources.

EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a metric used to evaluate a business' operating performance.

EBITDA margin

The EBITDA margin is a measure of a business' operating profit as a percentage of its revenue, which allows for a comparison of one business' real performance to others in its industry.

Working Capital

Working capital assesses a business' ability to pay its current liabilities with its current assets, provifing an indication of the subject’s short-term financial health, capacity to clear its debts within a year, and operational efficiency.

Free Cash Flow

Free cash flow is the cash a business generates after a business pays for its operating expenses and capital expenditures (CapEx).

Gross Margin

Gross margin is the net sales less the cost of goods sold (COGS). It is the amount of money a business retains after incurring the direct costs associated with producing the goods it sells and the services it provides.

Net Profit Margin

The net profit margin is used to calculate the percentage of profit a business produces from its total revenue. It measures the amount of net profit a business obtains per dollar of revenue gained. The net profit margin is equal to net pincome divided by total revenue

Operating Margin

The operating margin measures how much profit a business makes on a dollar of sales after paying for variable costs of production before paying interest or tax. It is calculated by dividing a business' operating income by its net sales. Higher ratios are generally better, illustrating the business is efficient in its operations and is good at turning sales into profits.

Return on Equity

The return on equity is a measure of the profitability of a business in relation to the equity, it is considered a gauge of how efficient it is in generating profits. It is calculated by dividing net income by shareholders' equity.

Revenue Concentration

Revenue concentration is a measure of how total revenue is distributed among your customer base. A business serving a large number of small-volume customers has a lower customer concentration than a business where a handful of large customers account for the majority of its business.

Total Accruals to Total Assets

Total assets to total accruals is a ratio that can be used to evaluate the quality of total revenue by calculating the change in working capital (other than cash) less depreciation relative to total assets.

Gross Margin Index

The Gross Margin Index is a metric that can be used to judge whether a business' profitability and pricing power is rising or falling. It is calculated as the ratio of last year's Gross Margin versus this year's Gross Margin.

Sales Growth Index

The Sales Growth Index measures the extent to which sales are growing year over year. An index value greater than 1 represents growth of sales.

Sales, General, and Administrative Expenses Index

Selling, General & Administrative expenses (SG&A) include all everyday operating expenses of running a business that are not included in the production of goods or delivery of services.

Days’ Sales in Receivables Index

The Days' Sales in Receivables Index can be used to measure trends in the earnings quality of a business. If the index value is greater than 1, it indicates that receivables are higher this year compared to last year.

Asset Quality Index

The term asset quality index is used to compare the allocation of capital between current asset and fixed assets and can be used to determine if a business is shifting operating expenses to capital.

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See the Financial Ratios data model and API documentation for more details.

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Missing Financial Ratios?

  • Some financial ratios might not always be available or returned for a business. For example, the current ratio is computed using the formula Current Assets/Current Liabilities. If a business does not have any accounts which are considered Current Assets, that ratio will be missing from the data set.
  • Financial ratios are calculated based on our normalized financial statements (balance sheet, income statement and cashflow statement).
  • A missing financial statement for a reporting period (e.g. due to no cashflow activity during that period), will result in an incomplete set of financial ratios

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