347 647 9001+1 714 797 8196Request a Call
Call Me

Ratio Analysis – Ratios Formulae

August 21, 2014
, ,
ratio formulae

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.

Liquidity Ratios

1 Current Ratio Current Assets/Current Liabilities
2 Quick Ratio Liquid Assets/Current Liabilities
3 Absolute Liquid Ratio Absolute Liquid Assets/Current Liabilities

Profitability Ratios

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

Working Capital Ratios

1 Inventory Ratio Net Sales / Inventory
2 Debtors Turnover Ratio Total Sales /  Account Receivables
3 Debt Collection Ratio Receivables  x Months or days in a year / Net Credit Sales for the year
4 Creditors Turnover Ratio Net Credit Purchases / Average Accounts Payable
5 Average Payment Period Average Trade Creditors / Net Credit Purchases X 100
6 Working Capital Turnover Ratio Net Sales / Working Capital
7 Fixed Assets Turnover Ratio Cost of goods Sold / Total Fixed Assets
8 Capital Turnover Ratio Cost of Sales / Capital Employed

Capital Structure Ratios

1 Debt Equity Ratio Total Long Term Debts / Shareholders Fund
2 Proprietary Ratio Shareholders Fund/ Total Assets
3 Capital Gearing ratio Equity Share Capital / Fixed Interest Bearing Funds
4 Debt Service Ratio Net profit Before Interest & Taxes / Fixed Interest Charges

Overall Profitability Ratio

1 Overall Profit Ability Ratio Net Profit / Total Assets


About the Author

Abhishek Malik is an MBA with 10 Years of Experience. His area of expertise include Finance, Sales & Marketing. He did MBA from from University of Gloucestershire, Certification in International Financial Reporting Standards (IFRS) from ACCA (UK), Entrepreneurship Management from SPJIMR. He is helping the students through his knowledge in the field of Finance, Accounts, Sales & Marketing.


Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.

Popular Blogs: Whatsapp Revenue Model | CFA vs CPA | CMA vs CPA | ACCA vs CPA | CFA vs FRM

Post ID = 62214