Transcript Slide 1

TYPES OF RATIOS
Liquidity ratios
LEVERAGE/CAPITAL RATIOS
ACTIVITY RATIOS
PROFITABILITY RATIOS
LIQUIDITY RATIOS
CURRENT
RATIO
{CURRENT
ASSETS:CURRENT
LIABILTIES}
ACID TEST/QUICK
RATIO
{(CURRENT ASSETS-
CASH/ABSOLUTE
LIQUIDITY RATIO
{(CASH+MARKETABLE
INVENTORIES):CURRENT
LIABILTIES}
SECURITIES):CURRENT
LIABILITIES}
BASIC DEFENSE INTERVAL
{(CASH+RECEIVABLES+MARKETABLE
SECURITIES):[(OPERATING
EXPENSES+INTEREST+INCOME
TAXES)/365]}
NET WORKING CAPITAL RATIO
[Current Assets - Current Liabilities
(excluding short-term bank
borrowing)]
CAPITAL STRUCTURE/LEVERAGE RATIOS
CAPITAL STRUCTURE RATIOS
EQUITY RATIO
(SHAREHOLDER’S EQUITY:TOTAL
CAPITAL EMPLOYED)
DEBT RATIO
(TOTAL DEBT:CAPITAL EMPLOYED)
DEBT TO EQUITY RATIO
(TOTAL
LIABILITIES:SHAREHOLDER’S
EQUITY)
COVERAGE RATIOS
DEBT SERVICE COVERAGE RATIO
[EARNINGS AVAILABLE FOR DEBT
SERVICE:(INTEREST+INSTALLMENTS)]
INTEREST COVERAGE RATIO
(EBIT:INTEREST)
PREFERENCE DIVIDEND COVERAGE
RATIO
(EAT:PREFERENCE DIVIDEND
LIABILITY)
CAPITAL GEARING RATIO
[(PREF SHARE CAPT+DEBEN+LONG
TERM LOANS):(EQUITY SH
CAP+RESERVES&SURPLUS-LOSSES)]
(FIXED ASSESTS:LONG TERM FUNDS)
PROPRIETORY RATIO
(PROPRIETORY FUND:TOTAL ASSETS)
ACTIVITY RATIOS
CAPITAL
TURNOVER RATIO
(SALES:CAPITAL
EMPLOYED)
INVENTORY TURNOVER
RATIO
(SALES:AVERAGE
INVENTORY) OR
(COST OF SALES:AVERAGE
STOCK) AS WELL AS
(RAW MATERIAL
CONSUMED:AVERAGE R.M
STOCK) IN CASE OF RAW
MATERIALS
FIXED ASSETS
TURNOVER RATIO
(SALES:CAPITAL ASSETS)
DEBTORS TURNOVER
RATIO
(CREDIT SALES:AVERAGE
ACCOUNTS RECEIVABLE)
AVERAGE COLLECTION
PERIOD
(AVERAGE A/CS
RECIEVABLE:AVERAGE
DAILY CREDIT SALES)
AVERAGE CREDIT SALES
(CREDIT SALES:365)
WORKING CAPITAL
TURNOVER RATIO
(SALES:WORKING
CAPITAL)
CREDITORS TURNOVER
RATIO
(CREDIT
PURCHASES:AVERAGE
A/CS PAYABLE)
AVERAGE PAYMENT PERIOD
(AVERAGE A/CS
PAYABLE:AVERAGE DAILY
CREDIT PURCHASES)
AVERAGE CREDIT
PURCHASES
(CREDIT PURCHASES:365)
PROFITABILITY RATIOS
BASED ON
REQUIREMENT
FOR ANALYSIS
FROM OWNERS
POINT OF VIEW
BASED ON ASSETS/
INVESTMENTS
BASED ON SALES
OF THE FIRM
BASED ON CAPITAL
MARKET INFORMATION
PROFITABILITY RATIOS REQUIRED FOR ANALYSIS FROM OWNERS POINT OF VIEW
RETURN OF
EQUITY
(PROFIT AFTER
TAX:NET WORTH)
NET PROFIR MARGIN
(NET
INCOME:REVENUE)
EARNINGS PER SHARE
(NET PROFIT AVAILABLE
TO EQUITY
SHAREHOLDERS:NO,OF
ORDINARY SHARES
OUTSTANDING
DIVIDEND PER
SHARE
(TOTAL PROFITS
DISTRIBUTED TO EQ.
SHAREHOLDERS:NO,
OF EQ. SHARES)
ASSET TURNOVER
(REVENUE:ASSETS)
PRICE EARNING
RATIO
(MARKET PRICE
PER
SHARE:EARNINGS
PER SHARE)
EQUITY MULTIPLIER
(ASSETS:SHAREHOLDER’S
EQUITY)
PROFITABILITY RATIOS BASED ON ASSETS/INVESTMENTS
RETURN ON
CAPITAL EMPLOYED
[(RETURN:CAPITAL
EMPLOYED)*100]
RETURN ON INVESTMENT
[(RETURN:CAPITAL
EMPLOYED)*100] OR
(PROFITABILITY
RATIO)(CAPITAL TURNOVER
RATIO)
PROFITABILITY RATIO
[(RETURN:SALES)*100]
RETURN ON ASSETS
(NET PROFIT AFTER
TAXES:AVERAGE TOTAL
ASSETS) OR
(NET PROFIT AFTER
TAXES:AVERAGE
TANGIBLE/FIXED ASSETS)
CAPITAL TURNOVER RATIO
(SALES:CAPITAL EMPLOYED)
PROFITABILITY RATIOS BASED ON SALES OF FIRM
GROSS PROFIT RATIO
[(GROSS PROFIT:SALES)*100]
P/V RATIO
{[(SALES-VARIABLE
COST):SALES]*100}
OPERATING PROFIT
RATIO
[(OPERATING
PROFIT:SALES)*100]
OPERATING PROFIT
(SALES-COST OF SALES)
NET PROFIT RATIO
[(NET
PROFIT:SALES)*100]
PROFITABILITY RATIOS BASED ON CAPITAL MARKET INFORMATION
PRICE-EARNING RATIO
(AVERAGE SHARE PRICE:EPS)
OR
(CLOSING SHARE PRICE:EPS)
YIELD
[(DIVIDEND:AVERAGE SHARE
PRICE)*100] OR
[(DIVIDEND:CLOSING SHARE
PRICE)*100]
(MARKET VALUE PER SHARE)/(BOOK VALUE PER SHARE)
[AVERAGE SHARE PRICE:(NET WORTH/NO, OF EQ. SHARES)]
OR
[CLOSING SHARE PRICE:(NET WORTH/NO, OF EQ. SHARES)]