Ratio Formula Numerator Denominator Signifi cance/Indicator1 DebtserviceCoverageRatioEarnings for Debt Services(interest+instalment)N/P after Taxation(+)Interest on Debt Funds(+)NonCash Operating

Expenses(eg:Depreciation & amortizations)(+)Non-Cash Operating Adjustments(eg: Loss on sale of Fixed Assets)Interest on Debt(+)Instalment of Debt? Loan(ie,Principalamount repaid)Indicates extent of currentearnings available for meetingcommitments of interest andinsatlment;Ideal ratio mustbetween 2 to 3 times2 InterestCoverageRatioEBITInterest EBIT Intere st on DebtIndicates ability to meet interestobligations of the currentyear.Should generally be greaterthan 1.3 PreferenceDividendCoverageRatioEATPrefere nce DividendEAT Dividend onPreference CapitalIndicates ability to pay Dividendon Preference CapitalRatio Formula Numerator Denominator Significance/Indicator1 Raw MaterialTurnover RatioCost of Material consumedAverage stock of RMOpening stock of

RM(+)Purchase(-)Closing stock of RM(opening stock+closing stock)2Indicates how fast /regularlyRM are used in Production2 WIP TurnoverRatioFactory CostAverage stock of WIPMaterial consumed(+)Wages(+)Production OH(Opening WIP+closing WIP)2Indicates the WIP Movement/production cycle3 FinishedGoods /StockTurnoverRatioCost of goods soldAverage stockFor Manufactures Op ening stock of FG (+)(+)Purchase(-)Closing stock of FG For Traders (+)Purchase(-)Closing stock of FG(opening stock+closing stock)2Or(Max stock+Min.Stock)2Indicates how fast inventoryis used /sold.High T/O ratioindicates fast movingmaterial while low ratio maymean dead or excessivestock4 DebtorsTurnoverRatioCredit SalesAverage AccountsReceivableCredit Sales net of returnsAccountsReceivable=Debtors+B/RA verage AccountsReceivable=(opg.bal+Clg.Bal)/2Indic ates the speed of collection of Creditsales/debtors

5 CreditorsTurnoverRatioCredit PurchasesAverage Accounts PayableCredit Purchases netof returns ,if anyAccount

Payable=Creditors+B/PAverage AccountsPayable=(opg.bal+Clg.Bal)/2Indicate s speed/velocity of payment to creditors6 WorkingCapitalTurnoverRatioTurnoverNet Wor king Capital Sales net of returns Current asset sLess:Current LiabilitiesAbility to generate sales perrupee of Working Capital7 Fixed AssetsTurnoverRatioTurnoverN et Fixed assets Sales net of returns Net Fixed assetsAbility to generate sales perrupee of Fixed assets8 CapitalTurnoverRatioTurnoverCapital Employe d Sales net of returnsCapital Employed can be computedusing (a)Assets Route or(b)LiabilityRoute(note 1)Ability to generate sales perrupee of Long TermInvestment N ote:1 Assets Route: Fixed assets+ Net Working CapitalLiability Route: Equity share capital+Pref. share capital+Reserves & surplus+Long term Debt
Less :Accumulated losses Less Non Tradeinvestment N ote:2

.T/O ratios can also be expressed in terms of days as 365 / T/O ratio.Eg:No.of days Average stock is held =365/stock turnover ratioRatio Formula Numerator Denominator Signific ance/Indicator1 Return onInvestment(ROI)OrReturn On CapitalEmployed(ROCE)Total EarningsCapital EmployedEarnings After Tax(+)Int.on Debt Funds(+)Non-operatingadjts(eg:otherincome/Loss on sale of Fixed assets etc)Capital Employed can becomputed by using (a) AssetsRoute or(b)LiabilityRoute(note 1 under TurnoverRatio)Overall profitability of the business on thetotal funds employed.If ROCE>Interest Rate ,use of debt funds is justified2 Return OnEquity(ROE)OrReturn on NetWorth(RONW)Equity EarningsShareholders FundsEarnings After TaxationNet Fixed Assets(+)Net WC(-)External Liabilities(LongTerm)Indicates profitability of Equity Funds/OwnersFunds invested in the business3 Return OnAssets(ROA)N/P after TaxesAverage Total AssetsEarnings After Taxation Average Total Assets orTangible Assets or FA ,ie,1/2 of Openg&Clg BalIndicates Net Income per rupee of averageFixed Assets.

4 Earnings PerShare(EPS)(EATPref.Dividend)Number of Equity SharesResidual earnings ie,EAT(-)Preference DividendNo.of Equity Sharesoutstanding=Equity CapitalFace value per shareReturn or Income per Share,whether or notdistributed as

dividends.5 Dividend PerShare(DPS)Total Equity DividendNumber of Equity SharesProfits Distributed toEquity Shareholders. As per (4)above Amou nt of Profits distributed per share.6 Price Earni ngsRatio(PE ratio)Market Price per shareEarnings Per ShareAverage Mkt Price(closing Mkt price) as perStock Exchangequotations.EPS as calculated in (4)aboveIndicates the relationship between MarketPrice and EPS, and the shareholdersperception of the company.7 Dividend yield(%) DividendAvg or Clg Market PriceDividend Average or closing Mkt priceas per Stock Exchangequotations.True return on invest.based on Mkt Value of Shares8 Book Value perShareNet WorthNumber of Equity SharesAs calculated in (2)aboveAs per (4)aboveBasis of Valuation of Shares based on bookvalues.9 Market Value tobook ValueMarket Price per shareBook value per ShareAverage or closing Mktprice as per StockExchange quotations.Ratio as calculated in (8)aboveHigher ratio indicates better

position forShareholders in terms of Return &capitalgains.