| 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 = 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 |
|
