FINACIAL STATEMENT

ANALYSIS - FORMULAS

1) Current ratio = Current assets/current liabilities.

2) Current assets = Cash in hand + cash at bank + Sundry debtors +

prepaid expenses + stock + bills receivable.

3) Current liabilities = Bills payable + outstanding expenses + sundry

creditors + bank overdraft.

4) Liquid ratio = Liquid assets/current liabilities.

5) Liquid assets = current assets – (stock + prepaid expenses).

6) Absolute liquid ratio = Absolute liquid assets/liquid liabilities.

7) Absolute liquid assets = cash in hand + cash at bank + short term

investment.

8) Liquid liabilities = current liabilities – bank overdraft.

9) Debt-equity ratio = long term debts/shareholders fund.

10) Long term debts = loan + debentures.

11) Shareholders fund = equity share capital + preference share

capital + reserve & surplus.

12) Proprietary ratio = shareholders fund/total tangible assets.

13) Total tangible assets = all fixed assets except goodwill, patents,
copyrights……

14) Gross profit ratio = gross profit * 100 / sales.

15) Gross profit = sales – cost of goods sold.

16) Cost of goods sold = sales – gross profit (or) opening stock +
purchases – closing stock.

17) Net profit ratio = net profit * 100 / sales.

18) Net profit = gross profit – (administrative expenses + distribution

expenses + selling expenses + financial expenses).

19) Operating profit ratio = operating profit * 100 / sales.

20) Operating profit = gross profit – operating expenses.

21) Operating (cost) ratio = cost of goods sold + operating expenses

* 100 / sales.

22) Capital turnover ratio = sales / capital employed.

23) Capital employed = equity share capital + preference share

capital + reserve & surplus +debentures +long term investments.

24) Fixed asset turnover ratio = sales / fixed assets.

25) Stock turnover ratio = sales / average stock.

26) Average stock = opening stock + closing stock / 2.

27) Debtors turnover ratio = credit sales / average account

receivable (debtors + bills receivable).

28) Creditors turnover ratio = credit purchases / average account

payable (creditors + bills payable).