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Ratio Analysis – Ratios Formulae

August 21, 2014

We have discussed various ratios and their importance. Starting with introduction to ratio analysis and classification of ratios, we have explained the importance of using various ratios and the formulae of how they are calculated. This blog post gives you the formulae for the ratios that we have discussed in this series.

ratio formulae

Liquidity Ratios

S. No.RATIOSFORMULAS
1Current RatioCurrent Assets/Current Liabilities
2Quick RatioLiquid Assets/Current Liabilities
3Absolute Liquid RatioAbsolute Liquid Assets/Current Liabilities

Profitability Ratios

S. No.RATIOSFORMULAS
1Gross Profit RatioGross Profit/Net Sales X 100
2Operating Cost RatioOperating Cost/Net Sales X 100
3Operating Profit ratioOperating Profit/Net Sales X 100
4Net Profit RatioOperating Profit/Net Sales X 100
5Return on Investment RatioNet Profit After Interest  And Taxes/ Shareholders Funds or Investments  X 100
6Return on Capital Employed RatioNet Profit after Taxes/ Gross Capital Employed X 100
7Earnings Per Share RatioNet Profit After Tax & Preference Dividend /No of Equity Shares
8Dividend Pay Out RatioDividend Per Equity Share/Earning Per Equity Share X 100
9Earning Per Equity ShareNet Profit after Tax & Preference Dividend / No. of Equity Share
10Dividend Yield RatioDividend Per Share/ Market Value Per Share X 100
11Price Earnings RatioMarket Price Per Share Equity Share/ Earning Per Share X 100
12Net Profit to Net Worth RatioNet Profit after Taxes / Shareholders Net Worth X 100

Working Capital Ratios

S. No.RATIOSFORMULAS
1Inventory RatioNet Sales / Inventory
2Debtors Turnover RatioTotal Sales /  Account Receivables
3Debt Collection RatioReceivables  x Months or days in a year / Net Credit Sales for the year
4Creditors Turnover RatioNet Credit Purchases / Average Accounts Payable
5Average Payment PeriodAverage Trade Creditors / Net Credit Purchases X 100
6Working Capital Turnover RatioNet Sales / Working Capital
7Fixed Assets Turnover RatioCost of goods Sold / Total Fixed Assets
8Capital Turnover RatioCost of Sales / Capital Employed

Capital Structure Ratios

S. No.RATIOSFORMULAS
1Debt Equity RatioTotal Long Term Debts / Shareholders Fund
2Proprietary RatioShareholders Fund/ Total Assets
3Capital Gearing ratioEquity Share Capital / Fixed Interest Bearing Funds
4Debt Service RatioNet profit Before Interest & Taxes / Fixed Interest Charges

Overall Profitability Ratio

S. No.RATIOSFORMULAS
1Overall Profit Ability RatioNet Profit / Total Assets

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