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7/29/2019 ratioanalysis-100223054649-phpapp02

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NO. RATIO FORMULA NUM

1 CURRENT RATIO:- Current Assets Invent

Current Liablilities (+) Debtors & B/R

(+) Cash & Bank

(+) Recivables / A

(+) Short Term Lo

(+) Marketable Inv

Short Term Se

2 Acid test or Quick Quick Assets Curr

Ratio:- Quick Liablilities (-) Inventories

(-) Prepaid Expen

3 Turnover Ratios:-

( a ) Inventory Turnover Cost of goods sold For Manuacturer

Ratio. Average stock Openin

(+) Cost of Produc

(+) Closing Stock

For Traders:-

Opening Stock of

(+) purchases

(-) Closing Stock

( b ) Debtor Turnover Net Credit Sales Credit Sales Net

Ratio. Average Debtors

( c ) Creditor Turnover Net Credit Purchase Credit Purchase n

Ratio. Average Creditor returns, if any.

4 Defensive - Interval Liquid Assests Curr

Ratio:- Projected daily cash (-) Inventories

Requirement (-) Prepaid Expen

5 Debt - Equity Ratio:- Debt Debt= Long term

TYPES OF RATIOS WIT


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Equity funds= Debentures+

term loans fro

fianancial Insti

6 Debt to capital ratio:- Debt Debt= Long term bor

Total funds funds= Debentures+

term loans fro

fianancial Insti

7 Coverage Ratios:

( a ) Interest Coverage EBIT Earnings be

Ratio. Interest and

( b ) Dividend Coverage EAT Earnings

Ratio. Preference Divivend

( c ) Total Coverage EBIT + Lease payment Earnings be

Ratio Interest+ lease payments and tax+ lea

+(preference dividend

+ installment of

principal)/(1-t)

( d ) Total cash flow EBIT+ Lease payments EBIT+ Leas

coverage Ratio + Depreciation+ non cash + Depreciati

expenses expe

lease payment+interest+

(principal repayment)+(1-t)+ (preference dividend)/(1-t)

8 Profit Margin:-

(I) Gross profit margin Gross profits * 100 Gross pro

sales or sales - cost of goo

or

sales-cost of goods sold*100

sales

(II) Net profit margin( a ) Operating Profit EBIT Earnings be

Ratio Sales and

( b ) Net profit Ratio EAT Earnings


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Sales

9 Cost of goods sold Cost of goods sold * 100 [For Manuactur

Ratio:- Net sales Openin

(+) Cost of Produ

(+) Closing Stoc

For Traders:-

Opening Stock o

(+) purchases

(-) Closing Stock

10 Operating Expense Administrative Expenses + Administ

Ratio:- Selling Expenses Selli

Net sales

11 Administrative Expense Administrative Expenses *100 Administra

Ratio:- Net sales

12 Selling Expenses Ratio:- Selling Expenses*100 Selling

Net sales

13 Opearting Ratio:- Cost of goods sold + [For Manuactur

operating expenses * 100 Openin

Net sales (+) Cost of Produ(+) Closing Stoc

For Traders:-

Opening Stock o

(+) purchases

(-) Closing Stock

operating

14 Financial Expenses Ratio:- Financial Expenses *100 Financia

Net sales

15 Return on Assets:- Net Profit after Tax Earning

Average Total Assets (+) Int. on debt fu

(+) Non Operatin

Net profit after taxes + interest (e.g. Other incom


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Average total Assests sale of fixed A

Net profit after taxes + interest

Average Tangible Assets

Net profit after taxes + interest

Average Fixed Assests

EAT+Interest-Tax advantage

on Interest

Average Total Assets/Tangible

Assets/Fixed Assets.

16 Return on Capital Employed:- Net Profit After Taxes Ear

. Average total capital employed (+) Int. on de

(+) Non Oper

Net Profit After Taxes+Interest (e.g. Other in

- Tax advantage on interest sale of fixed A

Average total capital employed

Net Profit After Taxes+Interest

Average

Total Capital Employed-

Average intangible Assets

17 Return on Total Shareholders Net Profit After Taxes Ear

Equity:- Average total Shareholders equity (+) Int. on de

(+) Non Oper

(e.g. Other in

sale of fixed A

18 Return on Equity Funds.:- Net Profit After Taxes - preference Ear

dividend (+) Int. on de

Average Ordinary Shareholders (+) Non Oper

Equity or net Worth (e.g. Other in

sale of fixed A

19 Earnings Per Share ( EPS):- Net profit available to equity Residual ear

shareholders EAT -prefere

Number of ordinary share outstanidng

20 Dividend per share ( DPS):- Net Profit after interest and preference Profits Distrib

dividend paid to ordinary shareholders Shareholders


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Number of ordinary shares outstanding

21 Dividend Pay-out Ratio:- Total dividend to equity holders Net Profit af

total net profit belonging to equity dividend pa

holders Number of or

or

Dividend per share ( DPS)Earnings Per Share ( EPS)

22 Earning Yield:- EPS Net pro

Market value of share

Number of or

23 Dividend Yield:- DPS Net Profit af

Market value of share dividend pa

Number of or

24 Price Earning Ratio:- Market price of shares Mar

EPS

25 Earning Power:- Net profit after taxes * sales Earning

sales total assets (+) Int. on deb

(+) Non Oper

(e.g. Other in

sale of fixed A

26 Inventory Turnover Ratio:- Cost of goods sold [For Manuac

Average Inventory Op

(+) Cost of Pr

(+) Closing S

For Traders:

Opening Stoc

(+) purchases

(-) Closing St

27 Raw Material Turnover:- cost of raw materials used Openein

Average Raw Material inventory (+) Purchase

(-) Closing St


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28 Work - in - progress:- cost of goods manufactured Mat

Average work in progress inventory (+) Wages

(+) production

29 Debtors Turnover:- Credit sales credit sales ne

Average Debtors + Average B/R

OR

Total Sales

Debtors + B/R

30 Average Collection Period Months (days) in a year Month

Debtors Turnover

31 Total assests Turn over:- Cost of goods sold [For Manuact

Average total assests Ope

(+) Cost of Pro

(+) Closing Sto

For Traders:-

Opening Stock

(+) purchases

(-) Closing Sto

32 Fixed Assets Turnover:- Cost of goods sold [For Manuact

Average fixed assests Ope

(+) Cost of Pro

(+) Closing Sto

For Traders:-

Opening Stock

(+) purchases

(-) Closing Sto

33 Capital Turnover:- Cost of goods sold [For Manuact

Average capital employed Ope

(+) Cost of Pro

(+) Closing Sto

For Traders:-

Opening Stock

(+) purchases

(-) Closing Sto


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34 Current Assets Turnover:- Cost of goods sold [For Manuacturers:-

Average current assests Opening Stock of

(+) Cost of Production

(+) Closing Stock of FG

For Traders:-

Opening Stock of FG

(+) purchases

(-) Closing Stock of FG]

35 Working Capital Turnover Ratio:- Cost of goods sold [For Manuacturers:-

Net Working Capital Opening Stock of

(+) Cost of Production

(+) Closing Stock of FG

For Traders:-

Opening Stock of FG

(+) purchases

(-) Closing Stock of FG]

DRAFTED BY: VIJAY KUMAR POPAT

ROLL NO: 54.

SECTION: SA - 1


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SIGNIFICANCE/ INDICATOR

It states the ability to repay short term

commitments promptly.

(i.e. Short term solvency).

Ideal ratio is 2:1High ratio indicates existence

of idle current Assets.

It indicates the ability to meet immediate

liabilities. Ideal Ratio is 1.33:1

In case of emergency crisis this ratio helps

in evaluating liablities meeting capacity.

It basically indicates how fast inventory is

used/sold. High T/O ratio indicates fast

moving material while low ratio may mean

dead or excessive stock.

It hepls in indicating the speed of collection

of credit sales / Debtors.

It hepls in indicating the speed of payment to

creditors.

It states the total ability to meet regualar

day in day out cash expenses.

It hepls in deriving reasonable relationship


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between Debt & Equity.

Its ideal ratio is 2:1

Its basically a indicator of use of external

funds and total capital employed in total.

ideal ratio = 67%

It hepls in indicating interest obligations. It

states the ability to meet interest obligations

of the current year.should ideally be greater

than 1.

This ratio helps in indicating ability to pay

dividend on preference capital.

It helps in indicating the ability to meet total

obligations of the current year, should ideally

be greater than 1.

Total cash flow i.e. in or out are being indicated

with the hepl of this ratio. It hepls in indicating

cash reserve of firm and its capibility to meet

daily cash requirements.

This ratio is a idicator of basic/ gross profitability

This ratio is a indicator of operating performance

business.

This ratio is a idicator of overall profitability.


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Indicates how fast inventory is used/ sold. High r

indicates fast moving material while low ratio ma

mean dead or excessive stock.

It hepls in indicating business ability to meet its

total expenses effectively of current year.

Ideal ratio is greater than 1.


Administrative activities expenses effectively..



Selling activities expenses effectively..



Operating activities expenses effectively..


It hepls in indicating business ability to meet itsFinancial activities expenses effectively..


It indicates Net income per ruppee of average fixe

tangible/ total assests.


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Overall profitability of the business on the total fu

employed can be derived easily with the help of t

Ratio,If ROCE > Interest Rate, use of debt fund is

justified.

Overall return of the business on the total

shareholders funds employed can be derived eas

with the help of this Ratio.

It indicates profitability of equity funds/ owners fu

invested in business.

It indicates return or income per share, whether o

distributed as dividends.

This ratio basically states the amount of profits

distributed per share.


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It signifies the relationship between dividend

distributed and earnings earned from such divide

It indicates true return on equity based on market

value of shares.

It indicates true return on investment based on

market value of shares.

It indicates the relationship between market price

EPS, and the shareholders perception of the com

It indicates the total earning power of business in

of sales and fixed assets.

Indicates how fast inventory is used/ sold. High T

indicates fast moving material while low ratio ma

daed or excessive stock.

Indicates how fast/ regularly Raw materials are us

production


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It indicates the work - in - progress movements /

production cycle.

Indicates the speed of collection of credit sales /

It states the avearge collection period of dedtors.

Ability to generate sales per ruppee of total asset

Ability to generate sales per ruppee of fixed asset

Ability to generate sales per quantity of capitalemployed.


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Ability to generate sales per ruppee of current as

Ability to generate sales based on working capita

employment.

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