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Ratio Formula:Liquidity Ratios

1. Current Ratio = Current Assets / Current Liabilities 2. Quick Ratio or Acid Test Ratio = Quick Assets / Current Liabilities 3. Cash Ratio/ Absolute Liquidity Ratio = Cash + Marketable Securities / Current Liabilities

Capital Structure/Leverage Ratios


1. Debt to Equity Ratio Total Liabilities / Shareholders' Equity 2. Interest Coverage Ratio= EBIT/ INTEREST 3. Capital Gearing Ratio = (Preference Share Capital Debentures Long Term Loan) / (Equity Share Capital Reserves & Surplus Losses) 4. Proprietary Ratio = Proprietary Fund / Total Assets

Activity Ratios
1. Capital Turnover Ratio= Sales/Capital Employed 2. Fixed Assets Turnover Ratio = Sales/Total Fixed Assets or Average Fixed Assets 3. Working Capital Turnover = Sales / Working Capital 4. Inventory Turnover Ratio or Stock Turnover Ratio = Cost of Sale / Average Stock 5. Debtors ' Turnover Ratio = Net Credit Sales / Average Accounts Receivable 6. Average Collection Period = Days in a Year or Month in a Year / Debtors ' Turnover Ratio 7. Creditors Turnover Ratio = Net Credit Purchases / Average Accounts Payable 8. Average payment period = Days in a Year or Month in a Year / Creditors Turnover Ratio

Profitability Ratios:1. Return on Equity (ROE) = PAT/ Net Worth or Shareholder Fund 2. Earnings per share (EPS) = Net profit available to equity holders / Number of ordinary shares outstanding 3. Dividend Payout Ratio = Dividend per Equity Share/ Earnings per Share 4. Operating Profit Ratio = Operating Profit / Sales *100 5. Net Profit Ratio = Net Profit / Sales *100 6. Gross Profit Ratio = Gross Profit / Sales *100 7. Operating Ratio = (Cost of Goods Sold +Operating Expenses) / Sales * 100

4. A business has current Ratio of 4:1 & a Quick Ratio of 1.2:1 . If working capital is Rs. 180000. Calculate total current Assets and Stock. 5. From the following information calculate the stock turnover ratio. Sales Rs. 200000, G.P 25% on cost, Opening Stock was 1/3rd of the value of closing stock Closing stock was 30% of sales. 6. Calculate and Closing stock from the following information:Total sales Rs 600000 Gross Profit 25% on Sales Stock Turnover Ratio = 5 times Closing stock is Rs. 12000 more than opening stock

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