| Short–term Financial Position or Test of Liquidity | |
|---|---|
| (a) Current Ratios |
=
Current Assets Current Liabilities
|
| (b) Quick or Acid Test or Liquid Ratio |
=
Liquid Assets Current Liabilities
|
| (c) Absolute Liquid Ratio |
=
Absolute Liquid Assets Current Liabilities
|
| (d) Interval Measure |
=
Liquid Assets Avg.Daily Operating Expenses
|
| Current Assets Movement (Asset Management Ratios) | |
| (a) Inventory /Stock Turnover Ratio |
=
Cost of Goods Sold Avg.Inventory at Cost
|
| (b) Debtors or receivables Turnover Ratio/Velocity |
=
Net Credit Annual Sale Avg.Trade Debtors
|
| (c) Average Collection Period |
=
Total Trade Debtors Sale per Day
|
| (d) Creditors / Payable Turnover Ratio / Velocity |
=
Net Credit Annual Purchase Avg.Trade Creditors
|
| (e) Average Payment Period |
=
Total Trade Creditos / Payable Avg.Daily Purchase
|
| (f) Working Capital Turnover Ratio |
=
Sales or Cost of Sales Net Working Capital
|
| Analysis of Long-term Financial Position or Test of Solvency | |
| (a) Debt Equity Ratio |
=
Outsiders Funds Shareholders′ Funds
or =
Outsiders′ Equities Internal Equities
|
| (b) Funded Debt to Total Capitalization Ratio |
=
Funded Debts Total Capitalization
× 100 |
| (c) Ratio of Long term Debt to Shareholders, Funds (Debt Equity) |
=
Long term Debts Shareholders′ Funds
|
| (d) Proprietary or Equity Ratio |
=
Shareholders Funds Total Assets
|
| (e) Solvency Ratio |
=
Total Liabilities to Outsiders Total Assets
|
| (f) Fixed Assets Net Worth Ratio |
=
Fixed Assets after Depreciation Shareholders′ Funds
|
| (g) Fixed Assets Ratio or Fixed Assets to Long Term Funds |
=
Fixed Assets after Depreciation Total long term Fund
|
| (h) Ratio of Current Assets to Proprietary funds |
=
Current Assets Shareholders′ Funds
|
| (i) Debt-Service or Interest Coverage |
=
Net Profit (before Int. & Taxes) Fixed Interest Charges
|
| (j) Total Coverage or Fixed Charge Coverage |
=
EBIT Total Fixed Charges
|
| (k) Preference Dividend Coverage Ratio |
=
Net Profit (before Int.& Tax) Preference Dividend
|
| (l) Cash to debt-Service Ratio or Debt Cash Flow Coverage |
=
CF
1 +
SFD 1 − Tax Rate
CF = Annual cash flow before Int. & Tax SFD = Sinking fund appropriation on debt |
| Analysis of Profitability | |
| (i) General Profitability: | |
| (a) Gross Profit Ratio |
=
Gross Profit Net Sale
× 100 |
| (b) Operating Ratio |
=
Operating Cost Net Sale
× 100 |
| (c) Expenses Ratio |
=
Particular Expense Net Sale
× 100 |
| (d) Net Profit Ratio |
=
Net Profit after Tax Net Sale
× 100 |
| (e) Operating Profit Ratio |
=
Operating Profit Net Sale
× 100 |
| Overall Profitability | |
| (a) Return on Shareholders’ Investment (RoI) |
=
Net Profiti after Tax & Interest Shareholders′ Fund
× 100 |
| (b) Return on Equity Capital |
=
Net Profit after Tax − Pref.Dividend Paid up Equity Capital
× 100 |
| (c) Earnings per Share (EPS) |
=
Net Profit after Tax − Pref.Dividend Number of Equity Share
× 100 |
| (d) Return on Gross Capital Employed |
=
Adjusted Net Profit Gross Capital Employed
× 100 |
| (e) Return on Net Capital Employed |
=
Adjusted Net Profit Net Capital Employed
× 100 |
| (f) Return on Assets |
=
Net Profit after Tax Avg.Total Assets
× 100 |
| (g) Capital Turnover Ratio |
=
Sale or Cost of Sale Capital Employed
× 100 |
| (h) Fixed Assets Turnover Ratio |
=
Sale or Cost of Goods Sold Fixed Assets
× 100 |
| (i) Working Capital Turnover Ratio |
=
Sale or Cost of Goods Sold Net Working Capital
× 100 |
| Market Test or Valuation Ratio | |
| (a) Dividend Yield Ratio |
=
Dividend per Share Market Value per Share
|
| (b) Dividend Payout Ratio |
=
Dividend per Equity Share Earnings per Share
|
| (c) Price/Earnings (P/E) Ratio |
=
Market Price per Equity Share Earnings per Share
|
| (d) Earning Yield Ratio |
=
Earnings per Share Market price per share
|
| (e) Market Value Book Value Ratio |
=
Market value per share Book value per share
|
| (f) Market Price to Cash Flow Ratio |
=
Market price per share Cash flow per share
|
| Market Test or Valuation Ratio | |
| (a) Capital Gearing Ratio |
=
Equity Share Capital + Reserve & Surplus Pref.Capital + Long term Debt bearing Fixed Interest
|
| (b) Total Investment to Long Term Liabilities |
=
Shareholders Fund + Long term Liabilities Long term Liabilities
|
| (c) Debt Equity Ratio |
=
Outsiders Funds Shareholders Funds
|
| (d) Ratio to Fixed Assets to Funded Debt |
=
Fixed Assets Funded Debts
|
| (e) Ratio of Current Liabilities to Proprietors fund |
=
Current Liabilities Shareholders′ Funds
|
| (f) Ratio of Reserve to Equity Capital |
=
Reserves Equity Share Capital
× 100 |
| (g) Financial Leverage |
=
EBIT EBIT − Interest & Pref.Dividend
|
| (h) Operating Leverage |
=
Contribution EBIT
|
