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  Analysis of Profitability:   General profitability:    Gross profit ratio = (Gross profit / Net sales) × 100      Operating ratio = (Operating cost / Net sales) × 100      Expense ratio = (Particular expense / Net sales) × 100      Operating profit ratio = (Operating profit / Net sales) × 100   Overall profitability:    Return on shareholders' investment or net worth = Net profit after interest and tax / Shareholders' funds         Return on equity capital = (Net profit after tax –  Preference dividend) / Paid up equity capital         Earnings per share (EPS) ratio = (Net profit after tax –  Preference dividend) / Number of equity shares         Return on gross capital employed = (Adjusted net profit / Gross capital employed) × 100         Return on net capital employed = (Adjusted net profit / Net capital employed) × 100         Dividend yield ratio = Dividend per share / Market value per share         Dividend payout ratio or pay-out ratio = Dividend per equity share / Earnings per share   Short Term Financial Position or Test of Solvency:    Current ratio = Current assets / Current liabilities      Quick or acid test of liquid ratio (for immediate solvency) = Liquid assets / Current liabilities      Absolute liquid ratio = Absolute liquid assets / Current liabilities   Current Assets Movement, Efficiency or Activity Ratios:    Inventory / Stock turnover ratio = Cost of goods sold / Average inventory at cost         Debtors of receivables turnover ratios = Net credit sales / Average trade debtors         Average collection period = (Trade debtors No. of working days) / Net credit sales         Creditors or payables turnover ratio = Net credit purchase / Average trade creditors          Average payment period = (Trade creditors No. of working days) / Net credit purchase         Working capital turnover ratio = Cost of sales / Net working capital   Analysis of Long Term Solvency:    Debt to equity ratio = Outsiders funds / Shareholders funds or External funds  / Internalfunds         Ratio of long term debt to shareholders funds (Debt equity) = Long term debt / Shareholders funds         Proprietary of equity ratio = Shareholders funds / Total assets         Fixed assets to net worth = Fixed assets after depreciation / Shareholders' funds         Fixed assets ratio or fixed assets to long term funds = Fixed assets after depreciation  / Total long term funds         Ratio of current assets proprietors' funds = Current assets / Shareholders' funds         Debt service or interest coverage ratio = Net profit before interest and tax / Fixed interest charges         Capital gearing ratio = Equity share capital / Fixed interest bearing funds  
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