Task Team of FUNdaMENTAL aCCOUNtIng School of Business. Sun Yat-sen University the company in generating profits on its Assets Return on Assets =(Net Profit /Total Assets)x 100 Return on Equity or Net Worth: The Return on Equity of a company measures the abili of the management of the company to generate adequate returns for the capital invested by the owners of a company. Generally a return of 10% would be desirable to provide dividends to owners and have funds for future growth of the company The formula Return on Equity or Net Worth=(Net Profit/Net Worth or Owners Equity) x 100 Net Worth or Owners Equity= Total Assets(minus) Total Liability Activity analysis(efficiency analysis)ratios, which are ratios that come off the the balance Sheet and the Income Statement and therefore incorporate one dynamic statement, the income statement and one static statement, the balance sheet. These ratios are important in measuring the efficiency of a company in either turning their inventory, sales, assets, accounts receivables payables. It also ties into the ability of a company to meet both its short term and long term Main activity analysis ratios and the formula DSO (Days Sales Outstanding): The Days Sales Outstanding ratio shows both the average me it takes to turn the receivables into cash and the age, in tems of days, of a company's accounts receivable. The ratio is regarded as a test of Efficiency for a company. The effectiveness with which it converts its receivables into cash. This ratio is of particular importance to credit and collection associates The formula Regular DSo =(Total Accounts Receivables/Total Credit Sales)x Number of Days in the period that is being analyzed Inventory Turnover ratio: This ratio is obtained by dividing the Total Sales of a company by its Total Inventory. The ratio is regarded as a test of Efficiency and indicates the rapidity with which the company is able to move its merchandise The formula: Inventory Turnover Ratio=Net Sales/Inventory It could also be calculated Inventory Turnover Ratio=Cost of Goods Sold/InventoryTask Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University the company in generating profits on its Assets. The formula: Return on Assets = (Net Profit / Total Assets) x 100 Return on Equity or Net Worth: The Return on Equity of a company measures the ability of the management of the company to generate adequate returns for the capital invested by the owners of a company. Generally a return of 10% would be desirable to provide dividends to owners and have funds for future growth of the company The formula: Return on Equity or Net Worth = (Net Profit / Net Worth or Owners Equity) x 100 Net Worth or Owners Equity = Total Assets (minus) Total Liability Activity analysis (efficiency analysis) ratios, which are ratios that come off the the Balance Sheet and the Income Statement and therefore incorporate one dynamic statement, the income statement and one static statement , the balance sheet. These ratios are important in measuring the efficiency of a company in either turning their inventory, sales, assets, accounts receivables or payables. It also ties into the ability of a company to meet both its short term and long term obligations. Main activity analysis ratios and the formula: DSO (Days Sales Outstanding): The Days Sales Outstanding ratio shows both the average time it takes to turn the receivables into cash and the age, in terms of days, of a company's accounts receivable. The ratio is regarded as a test of Efficiency for a company. The effectiveness with which it converts its receivables into cash. This ratio is of particular importance to credit and collection associates. The formula: Regular DSO = (Total Accounts Receivables/Total Credit Sales) x Number of Days in the period that is being analyzed Inventory Turnover ratio: This ratio is obtained by dividing the 'Total Sales' of a company by its 'Total Inventory'. The ratio is regarded as a test of Efficiency and indicates the rapidity with which the company is able to move its merchandise. The formula: Inventory Turnover Ratio = Net Sales / Inventory It could also be calculated as: Inventory Turnover Ratio = Cost of Goods Sold / Inventory