ModuleAccounting & Finance
Topic
Ratio Analysis
Formulae for
Ratio Analysis
Liquidity
Shareholders
Profitability
Efficiency
Liquidity Ratios
Current Ratio Quick Ratio
Current Ratio =
Current Assets
Current Liabilities
Liquidity
Quick Ratio =Current Assets- Stock
Current Liabilities
Note: Quick ratio is also called Acid test ratio
Liquidity
Profitability Ratios
Net Profit Margin Gross Profit Margin ROCE
Net Profit Margin =
Net profit
Net SalesX 100
Profitability
Gross Profit Margin =
Gross profit
Net SalesX 100
Profitability
ROCE =Net Profit before Interest & Tax
Capital Employed
ROCE =Return on Capital Employed
X 100
Profitability
Shareholders Ratios
ROE =Profit after preference dividend
Equity Funds
Shareholders
EPS =Number of Equity Shares
Profit after preference dividend
EPS = Earnings per Share
Shareholders
DPS =Dividends paid to Equity
Shareholders
Number of Equity Shares
DPS = Dividends per Share
Shareholders
Dividend Yield =
Dividends per shareMarket price per share
X 100
Shareholders
Efficiency Ratios
Stock turnover =
Cost of sales
Average Stock
Efficiency
Debtors days =Debtors
Credit sales
X 365
Efficiency
Creditors payment period =
Creditors
Credit PurchasesX
365
Efficiency
Gearing Ratio =
Loan capital + Preference capital
Capital Employed
Loan capital = Long term loan + Debentures
X 100
END
Liquidity
Shareholders
Profitability
Efficiency