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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. RATIOS FORMULAS
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

S. No. RATIOS FORMULAS
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

S. No. RATIOS FORMULAS
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

S. No. RATIOS FORMULAS
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

S. No. RATIOS FORMULAS
1 Overall Profit Ability Ratio Net Profit / Total Assets

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