SL No Description

A LIQUIDITY RATIOS
1 Current Ratio
2 Quick Ratio or Acid test Ratio
3 Absolute Cash Ratio
4 Interval Measure
B CAPITAL STRUCTRE RATIOS
1 Equity to Total Funds Ratios
2 Debt Equity Ratio
3 Capital Gearing Ratio
4 Fixed Asset to Long Term Fund Ratio
5 Proprietary Ratios
C COVERAGE RATIOS
1 Debt Service Coverage Ratio
2 Interest Coverage Ratio
3 Preference Dividend Coverage Ratio
D TURNOVER RATIOS
1 Capital Turnover Ratio
2 Fixed Asset Turnover Ratio
3 Working Capital Turnover Ratio
4 Finished Goods or Stock Turnover ratio
5 WIP Turnover Ratio
6 Debtors Turnover ratio
7 Creditors Turnover ratio
E PROFITABILITY RATOS BASED ON SALES
1 Gross Profit ratio
2 Operating profit Ratio
3 Net profit Ratio
4 Contribution Sales Ratio
F PROFITABILITY RATOS OWNERS VIEW POINT
1
Return on investment (ROI) or return on capital
employed
2 Return on Equity
3 Earnings Per Share
4 Dividend Per Share
5 Return On Assets
Link
Current_Ratio
Quick_Ratio_or__Acid_test_Ratio
Absolute_Cash_Ratio
Interval_Measure
Equity_to_Total_Funds_Ratios
Debt_Equity_Ratio
Capital_Gearing_Ratio
Fixed_Asset_to_Long_Term_Fund_Ratio
Proprietary_Ratios
Debt_Service_Coverage_Ratio
Interest_Coverage_Ratio
Preference_Dividend_Coverage_Ratio
Capital_Turnover_Ratio
Fixed_Asset_Turnover_Ratio
Working_Capital_Turnover_Ratio
Finished_Goods_or_Stock_Turnover_ratio
WIP_Turnover_Ratio
Debtors_Turnover_ratio
Creditors_Turnover_ratio
Gross_Profit_ratio
Operating_profit_Ratio
Net_profit_Ratio
Contribution_Sales_Ratio
Return_on_investment__ROI__or_return_on_capital_employed
Return_on_Equity
Earnings_Per_Share
Dividend_Per_Share
Return_On_Assets
No Ratio Formula Numerator Denominator Significance
1 Current Ratio
Current Assets
Current Liabilities
Inventories
+ Debtors
+Cash & Bank
+Receivables/Accruals
+Short term Loans
+Marketable Investments
Sundry Creditors (For Goods)
+Outstanding Expenses
+Short Term Loans & advances
+Bank Overdraft/ Cash Credit
+Provisio for Taxation
+Proposed or Unclaimed Dividend
Ability to repay short term
commitmnets prompltly. Ideal ratio
is 2:1.High ratio indicates existence
of idle current assets
2
Quick Ratio or
Acid test Ratio
Quick Assets
Quick Liabilities
Current Assets
Less: Inventories
Less Prepaid Expenses
Current Liabilities Ability to meet immediate
liabilities.Ideal ratio is 1.33:1
3 Absolute Cash Ratio
(Cash + Marketable securuties)
Current Liabilities
Cash In Hand
+Balance at Bank
+Marketable securuties & short
Term investments
Sundry Creditors (For Goods)
+Outstanding Expenses
+Short Term Loans & advances
+Bank Overdraft/ Cash Credit
+Provisio for Taxation
+Proposed or Unclaimed Dividend
Availibility of cash to meet short
term commitments
4 Interval Measure
Quick Assets
Cash Expenses per Day
Current Assets
Less: Inventories
Less Prepaid Expenses
Annual Cash Expenses
365
Cash expenses=Total expenses Less
Depreciaton and write offs
Ability to meet regular cash
expenses
No Ratio Formula Numerator Denominator Significance
1
Equity to Total Funds
Ratios
Share Holders Fund
Total Funds
Equity Share Capital
+Preference Share Capital
+Reserves and Surplus
Less Accumulated Losses
Total Long term Funds employed in
business =Debts+Equity
Indicates long term solvency; mode
of financing; extend of own funds
used in operations
2 Debt Equity Ratio
Debt
Equity
Long term borrowed funds, ie
Debentures,Long term loans from
institutions
Equity Share Capital
+ Preference Share Capital
+Reserves and Surplus
Less Accumulated losses if any
Indicates relationship between debt
& Equity, Ideal ratio is 2:1
3 Capital Gearing Ratio
Fixed Charge Bearing Capital
Equity share holders Funds
Preference Share Capital
+Debentures
+ Long Term Loans
Equity Share Capital
+ Reserves and Surplus
Less Accumulated Losses if any
Shows Proportion of fixed charge
(dividend or interest) bearing capital
to equity funds, the extend of
advantage or leverage enjoyed by
equity share holders
4
Fixed Asset to Long
Term Fund Ratio
Fixed Assets
Long Term Funds
Net Fixed Assets ie
Gross Block
Less Depreciation
Share Holders Fund
+ Debt Funds (Numerator
1+Numerator 2 as in 1 & 20
shows proprtion of Fixed Assets
finanaced by by long term funds.
Indicats the financing approach
followd by the
firm.conservative,matching or
aggressive; idea ratio is less than 1
5 Proprietary Ratios
Proprietary Funds
Total Assets
Equity Share Capital
+ Preference Share Capital
+Reserves & Surplus
Less Accumulated Reserves
Net Fixed Assets
+ Total Current Assets
(Only tangiable Assets will be
included)
Shows extend of owners fund
utilised in financing assets
No Ratio Formula Numerator Denominator Significance
A. LIQUIDITY RATIOS - SHORT TERM SOLVENCY
B. CAPITAL STRUCTRE RATIOS-INDICATOR OF FINANCING TECHNIQUES AND LONG TERM SOLVENCY
C. COVERAGE RATIOS - ABILITY TO SERVE FIXED LIABILITIES
1
Debt Service
Coverage Ratio
Earnings for Debt service
(Interest + Instalment)
Net Profit after Taxation
+ Taxation
+ Interest on Debt Funds
+ Non Cash Operating expense
+ Non Operating Adjustments
Interest on Debt
+ Instalment of Debt
(Principal Repaid)
Indicates extend of current earnings
available for meeting commitments
and outflow towards interest and
instalments; Ideal ratio must be
between 2 to 3 times
2
Interest Coverage
Ratio
Earnings before Interest & Tax
Interest
Sales
Less variable cost
Less Fixed Cost(excluding Int)
or
EAT+Tax+ Interest
Interest on debt Fund
Indicates ability to meet interest
obligations of the current year.
Should be generally greater than 1
3
Preference Dividend
Coverage Ratio
Earnings after Tax
Preference Dividend
EAT Dividend on Preference Share Capital
Indicates ability to pay dividend on
preference share capital
No Ratio Formula Numerator Denominator Significance
1
Capital Turnover
Ratio
Sales
Capital Employed
Sales net of returns
Equity share Capital
+ Preference Share Capital
+Reserves & Surplus
+ Debentures
+ Long Term Loans
Less Accumulated Losses
Ability to generate sales per rupee
of long term investment. The higher
the turnover ratio the better is
2
Fixed Asset Turnover
Ratio
Turnover
Fixed Assets
Sales Net of returns Net Fixed Assets
Ability to generate sales per rupee
of Fixed Asset
3
Working Capital
Turnover Ratio
Turnover
Net Working Capital
Sales Net of returns Current Assets Less Current liabilities
Ability to generate sales per rupee
of Fixed Assets
4
Finished Goods or
Stock Turnover ratio
Cost of Goods Sold
Average Stock
For Manufacturers
Opening Stock
+Cost fo production
less Closing stock
For Traders
Opening Stock
+ Purchases
Less Closing stock
Opening Stock +Closing Stock
2
Maximum Stock + Minimum Stock
2
Indicates how fast inventory is used
/ Sold
A higher turnover ratio generally
indicates fast moving material while
low ratio may mean dead or
excessive stock.
5 WIP Turnover Ratio
Factory Cost
Average stock o WIP
Materials +wages+Production
OH
Opening WIP+Closing WIP
2
Indicates the WIP movement
/Produaction cycle.
6
Debtors Turnover
ratio
Credit Sales
Average Accounts receivable
Credit Sales net of returns
AR= Debtors+ BR
Average AR=
Opening Bal+Closing Bal
2
Indicates speed of collection of
credit sales
7
Creditors Turnover
ratio
Credit Purchases
Average Accounts payable
Credit Purchases Net of returns if
any
AP= Creditors+ BP
Average AP=
Opening Bal+Closing Bal
2
Indicates Velocity of debt payment
No Ratio Formula Numerator Denominator Significance
1 Gross Profit ratio
Gross profit
Sales
Gross profit As per trading
Account
sales net of returns Indicator of basic profitability
E. PROFITABILITY RATOS BASED ON SALES
D. TURNOVER / ACTIVITY / PERFORMANCE RATIOS
2 Operating profit Ratio
Operating profit
Sales
Sales Less Cost of sales
or
Net profit
Add Non operating expenses
Less Non operating Incomes
sales net of returns
Indicator of Operating performance
of businesss
3 Net profit Ratio
Net profit
Sales
Net profit sales net of returns Indicator of overall profitabillity
4
Contribution Sales
Ratio
Contribution
Sales
Sales less Variable costs sales net of returns
Indicator of profitability in marginal
costing
No Ratio Formula Numerator Denominator Significance
1
Return on investment
(ROI) or return on
capital employed
Total Earnings
Total capital Employed
Profit After Taxes
Add : Taxation
Add : Interest
Add: Non Trading Expenses
Add: Non Operating incomes like
rents,interest and dividends
Asset Route:
Net fixed assets (Including intangiable
assets like patents,but not fictitiious
assets miscellaneous expenditure not
w/off)
+Net Working Capital
Liability Route
Equity Share Capital
+Prefence share capital
+reserves & Surplus
+Debentures and long term Loans
Less Accumulated Losses
Less Non trade Investments
Overall profitability of the business
for the capital employed; indicates
the return on the total capital
employed.
Comparison of ROCE with rate of
interest of debt leads to financial
leverage. If ROCE> Interest rate,
use of debt funds is justified
2 Return on Equity
Earnings After Tax
Net Worth
Profit After Taxes
Net Fixed Assets
+Net working Capital
Less External Liabilites(Long Term)
Profitability of Equity funds invested
in the business
3 Earnings Per Share
(PAT-Preference Dividend)
Number of Equity Shares
Profit After Taxes
Less Preference Dividend
Number of Equity shares Outstanding=
Equity Share Capital
Face value per share
Return or income per share,
whether or not distributed as
dividends
4 Dividend Per Share
Dividend
Number of Equity Shares
Profit distributed to equity share
holders
Number of Equity shares Outstanding=
Equity Share Capital
Face value per share
Amounts of dividend distributed per
share
F. PROFITABILITY RATOS OWNERS VIEW POINT