RATIO ANALYSIS

RATIOS Profitability Ratios Gross Profit Ratio Return on Shareholders Fund Return on Shareholders Equity Return on Capital Employed Return on Assets Operating Ratio Operating Profit Net Profit Ratio Expenses Ratio* 75% - 80% 25% - 30% STANDARDS Investors Company

Market Ratios Earning Per Share (EPS) Dividend Yield Payout Ratio Price Earning Ratio ( P/E) Coverage Ratios Fixed Interest Fixed Dividend

Debt service Coverage Turnover Ratios Capital Turnover Ratio Fixed Assets Turnover Working Capital Turnover Ratio Total Assets turnover ratio Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio 45 days/8 times

1. Material Consumed= Material consumed/NetSale 2.Conversion Cost=Labour+Manufacturing exp/Net S

INTERPRETATION

Higher the ratio, Higher is the profitability. helps the shareholders to know the companies position to give them return. helps the equity shareholders know the percentage of Profit they can get. higher the ratio more efficient is capital employed. It measures the profits to the assets to see the profitability of investment Lower operating ratio shows higher operating profit.

Higher the ratio better the Efficiency of company. Lower the ratios better the profitability.

This ratio checks the earning power of the companies and its capacity to pay dividend Shows the rate of return to shareholders in the form of dividends based on the market price of the share. It indicates what portion of the EPS has been used to paying back the dividend and what has been retained. It indicates the market value of every rupee earning in the firm to the industry average. High ratio indicates

It indicates whether the business would earn sufficient profits to pay periodically the interest charges. It helps the preference shareholders know the dividend at fixed rate they would receive in preference to the equity shareholders.

It shows whether the company is in the position to make payment of principal amount on time.

Lower ratio shows the lower profits and higher ratio shows the higher profits. Helps to indicate how the fixed assets are used to generate sales in the business. Low ratio indicates the ineffeciency of fixed assets. Higher the ratio lower the investment in working capital and vice versa Higher ratio indicates overtrading of total assets while low ratio indicates the idle capacity. It measeures how quickly inventory is sold. Its a test of inventory mangement. low collection period and low ratio indicate delayed payment by debtors. Higher ratio indicates that the creditors are not paid in time. A lower ratio indicates that the business is not taking full advantage of the credit period allowed by the

Expense Ratios* 1. Material Consumed= Material consumed/NetSales*100 2.Conversion Cost=Labour+Manufacturing exp/Net Sales*100 3.Administration Expenses=Admin Exp/Net Sales *100 4.Selling &DistributionExp= S&D exp/Net Sales*100

CALCULATION

(GP/Net Sales) *100 (Net PAT & Interest/Shareholders Funds)*100 (Net PAT & Interest/Equity shareholders Fund)*100 (Operating Profit/capital employed)*100 (Net PAT/Total Asset)*100 (C.O.G.S+Expenses/Net Sales)*100 (OperatingProfit/Net Sales)*100 (NP/Net Sales)*100 (Expenses /Net Sales)*100

Net PAT/ Number of Equity DPS/MPS (Dividend Per Share (DPS)/EPS or retained earning/total earning)*100 Market Price Per Share(MPS) /Earning Per share

net profit after tax and Interest/Interest amount net profit after tax and Interest/Preference Dividend

Net profit before Interest and taxes/Interst+principal installment/1-tax rate

Sales / Capital Employed Sales/Net fixed Asset Sales /Net working Capital Sales/Total asset COGS/ Average Inventory at cost Net Credit Sales/Average Debtors+Bills Recievable Net Credit Purchases/Average Creditors+Bills Payable

tSales*100 Net Sales*100