On this page is a net interest margin calculator for banks (and bank-like entities which earn a credit spread). Enter the amount of interest or investment income, interest or investment expenses, and the current and last period earning assets to estimate the net interest margin.
For a bank, the net interest margin is a comparison between what a bank earns between interest it pays to its lenders (deposits and similar) and the amount it earns on investments elsewhere. By comparing net interest margin across banks, its one way to rank a bank's performance with the current interest rate conditions. Removing interest expense from the numerator leaves you with the gross yield on earning assets, which is the weighted average yield on earning assets.
A positive net interest margin shows that a bank is earning more money in interest than its cost of funding its investments.
Net interest margin isn't the only way a bank makes money, of course. Non-interest income can be significant, for example fees, origination costs, membership costs, and other charges may make up a significant amount of a bank's revenue.
The net interest margin formula is:
net\ interest\ margin=\frac{interest\ income-interest\ expense}{average\ earning\ assets}Where:
These other tools help you value banks:
Here is a receivables turnover calculator, which computes how quickly a company turns over its receivables, or sales extended on credit to customers. Enter the company's net credit sales (or, optionally, top line sales) and two period's accounts receivable to compute the ratio.
The receivables turnover ratio is a liquidity ratio which measures how quickly and efficiently a company turns credit sales into cash. The canonical measure uses net credit sales (sales on credit netting out sales returns and allowances), but for companies which do most sales on credit using revenue will work decently as well.
The receivables turnover ratio is related to the average collection period, which estimates how long the weighted average customer takes to pay for goods or services.
The receivables turnover ratio formula is:
receivables\ turnover\ ratio=\frac{net\ credit\ sales}{average\ accounts\ receivable}Where:
Liquidity ratios and calculations guess how easy it would be for a company to deal with its current debt and liabilities. See more liquidity tools here:
Below is an operating cash flow ratio calculator which estimates how many times over a company could pay off current liabilities in a given period using only operating cash flows. Enter a company's operating cash flow and current liabilities to compute the ratio.
The operating cash flow ratio shows the multiple of times a company could pay off its current liabilities using cash flows from a given period. Unlike balance sheet based liquidity ratios like the quick ratio and current ratio, the cash flow ratio shows how quickly the company could pay off its short term debts with new money coming in (both held static).
A value below 1 – especially if you are looking at a year of cash flows – could mean the company will need to find other means to pay short term debt. Note that large capital expenditures paid in the current period can temporarily depress the ratio, however. You should normalize your cash flows to determine how well current liabilities are covered by cash flow.
The operating cash flow ratio formula is:
operating\ cash\ flow\ ratio=\frac{operating\ cash\ flow}{current\ liabilities}Where:
Liquidity ratios and calculations guess how well a company can deal with its current debt and liabilities. See more liquidity tools here:
Here is an average collection period calculator which estimates how quickly the company is able to collect on its accounts receivable. Enter the company's Accounts Receivable and Revenues and the tool will estimate how quickly the company collects.
The average collection period refers to how long – in days – it takes for a company to collect on its accounts receivable. Accounts Receivable is the total sum of money owed by customers (businesses or consumers) currently extended on credit, and by comparing it to total sales you can quickly guess how efficiently the company collects on these debts.
Although you can calculate it for a quarter, for most businesses it's safer to look at a full year to compare fairly due to seasonality or accounts receivable booked in previous quarters.
The average collection period formula is:
average\ collection\ period=\frac{accounts\ receivable}{revenue}*days\ in\ periodWhere:
Liquidity ratios and calculations guess how well a company can deal with its current debt and liabilities. See more liquidity tools here:
Here is an inventory turnover ratio calculator which also estimates the number of days of sales that are held in inventory. Enter the Cost of Goods Sold in a given period, and the Inventory held in Current Assets and the beginning and end of the period to compute the inventory turnover.
Inventory turnover or the inventory turnover ratio is a number denoting how quickly a company sold and replenished its inventory in a given period. It also allows you to get an estimate of the number of days of sales the current inventory supports if the company doesn't replenish its inventory.
There's no good or bad number in a vacuum for inventory turnover (although more inventory turnover means a company could operate with less working capital if appropriate). Compare the number you compute with other peer companies to get an idea for how a company compares.
The inventory turnover formula is:
inventory\ turnover=cost\ of\ goods\ sold/average\ inventory
Where:
Once you have the inventory turnover number, you can easily estimate how many days of sales the current inventory could support.
The days of sales in inventory formula is:
days\ of\ sales\ in\ inventory=days\ in\ period/inventory\ turnover
Where:
Once you have the inventory turnover number, you can easily estimate how many days of sales the current inventory could support.
All liquidity calculators give a temperature check on a company's ability to stay liquid by paying off creditors on liabilities due in the next year. Here are some other tools showing liquidity ratios:
Below is a working capital calculator. See how much a company has to immediately invest in its business and growth by netting our current assets and current liabilities.
Working capital is the short-term funds a company can use to fund its day-to-day operations or dedicate to growth. It is computed by netting out the current assets and current liabilities on a company's balance sheet. It's closely linked to the current ratio or working capital ratio, which shows the proportion of current assets and liabilities.
Negative working capital is when current liabilities are higher than current assets. It's not necessarily a bad situation portending doom – companies that turn over inventory extremely quickly and have good payment terms on inputs can show persistent negative working capital.
The working capital formula is:
working\ capital=current\ assets-current\ liabilities
Where:
Liquidity ratios and calculations help estimate how a company can deal with its short term debt and liabilities. See other tools here:
Below is a cash ratio calculator. Enter a company's cash and cash equivalents current liabilities to compute the cash ratio.
A company's cash ratio is one of the most aggressive liquidity ratios, and measures a company's ability to meet short term liability needs using only cash and cash equivalents. While other ratios like the quick ratio allow for selling of marketable securities and receiving owed payments, the cash ratio only allows immediately accessible cash.
A ratio of 1 or greater means the company can meet its short term needs with its cash. A ratio less than 1, however, doesn't mean the company is illiquid necessarily – compare it to some of the other liquidity ratios in the links below to double check.
The quick ratio formula is:
cash\ ratio=\frac{cash\ \&\ cash\ equivalents}{current\ liabilities}Where:
Liquidity ratios show how easily a company can meet its near term debts. See other tools:
Below is a quick ratio calculator. Enter a company's cash and cash equivalents, accounts receivable, and other marketable securities, then enter current liabilities to compute the quick ratio.
(The quick ratio is used interchangeably with the acid test ratio. However, they will differ in certain situations).
The quick ratio is an aggressive liquidity ratio and check of a company's ability to pay for short-term leases and liabilities by only considering easily saleable assets such as cash and marketable securities. It also allows for accounts receivable.
The quick ratio is equivalent to the acid test ratio in GAAP accounting, which approaches the same number by netting certain assets from current assets. In certain situations in other accounting regimes, the two may differ; consider a company with hard or impossible to liquidate current assets like prepaid taxes or insurance contracts listed as current assets. For the most part, though, it's interchangeable with the acid test ratio.
Like other liquidity ratios, a ratio of 1 or above means the ratio indicates the company can meet its current liquidity needs.
The quick ratio formula is:
quick\ ratio=\frac{cash\ \&\ cash\ equivalents+accounts\ receivable+marketable\ securities}{current\ liabilities}Where:
Liquidity ratios show how easily a company can meet its near term debts. See other tools:
Below is an acid test ratio calculator. Enter a company's current assets, inventories, prepaid costs, and current liabilities to see the acid test ratio.
(The acid test ratio is sometimes used interchangeably with the quick ratio. However, this tool is more aggressive than our quick ratio tool).
An acid test ratio is a liquidity ratio that models a company's ability to pay its liabilities due in the following 12 months using assets currently on the books minus hard (or impossible) to liquidate assets such as inventory and prepaid liabilities. A number above 1 shows that a company could meet its short term liquidity needs in its current state.
In GAAP accounting, it's the equivalent of the quick ratio, which attempts to strip out assets that can be sold quickly to pay off current liabilities. In other accounting systems or small company (or non-compliant) books, you should attempt to strip out other not-easily-to-liquidate current assets, for example if companies list office supplies, prepaid insurance contracts, prepaid taxes, biological assets, and so-on.
Note that, for the most part, the acid test ratio and quick ratio are used interchangeably.
The acid test ratio formula is:
acid\ test\ ratio=\frac{current\ assets-inventories-prepaid\ costs}{current\ liabilities}Where:
Liquidity ratios guess how well a company can handle debts and liabilities due in the next twelve months. Try some other liquidity calculators here:
Below is a current ratio calculator or working capital ratio calculator. Find a company's current assets and current liabilities from its balance sheet, and the tool will compute a current ratio.
A current ratio is a liquidity ratio that gives an at-a-glance check on a company's ability to pay its liabilities due in the following 12 months using assets currently on the books. It shows a company's ability to pay short-term liabilities without bringing in additional cash. It's also sometimes called the working capital ratio.
A current ratio of 1 or higher means a company can likely meet its short term liquidity needs, even without further cash.
The current ratio formula is:
current\ ratio=\frac{current\ assets}{current\ liabilities}Where:
All liquidity calculators give a temperature check on a company's ability to stay liquid by paying off creditors on liabilities due in the next year. Here are some other tools showing liquidity ratios: