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    The Formulas of All The Ratios: A. Financial Stability, Solvency, Liquidity, Balance Sheet Ratios

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    Aayush Agrawal
    The document lists and defines 24 financial ratios used to analyze company performance across several categories: (1) financial stability, solvency, and liquidity ratios; (2) management efficiency and revenue statement ratios; and (3) overall profitability and combined ratios. Key ratios include the current ratio, quick ratio, gross profit ratio, return on equity, and debt-to-equity ratio. The ratios are used to evaluate factors like profitability, capitalization, operating efficiency, investments, and financial health.

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    The Formulas of All The Ratios: A. Financial Stability, Solvency, Liquidity, Balance Sheet Ratios

    Uploaded by

    Aayush Agrawal
    92 views2 pages
    The document lists and defines 24 financial ratios used to analyze company performance across several categories: (1) financial stability, solvency, and liquidity ratios; (2) management efficiency and revenue statement ratios; and (3) overall profitability and combined ratios. Key ratios include the current ratio, quick ratio, gross profit ratio, return on equity, and debt-to-equity ratio. The ratios are used to evaluate factors like profitability, capitalization, operating efficiency, investments, and financial health.

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    1 Ratio Analysis Formulas

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    The document lists and defines 24 financial ratios used to analyze company performance across several categories: (1) financial stability, solvency, and liquidity ratios; (2) management efficiency and revenue statement ratios; and (3) overall profitability and combined ratios. Key ratios include the current ratio, quick ratio, gross profit ratio, return on equity, and debt-to-equity ratio. The ratios are used to evaluate factors like profitability, capitalization, operating efficiency, investments, and financial health.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    92 views2 pages

    The Formulas of All The Ratios: A. Financial Stability, Solvency, Liquidity, Balance Sheet Ratios

    Uploaded by

    Aayush Agrawal
    The document lists and defines 24 financial ratios used to analyze company performance across several categories: (1) financial stability, solvency, and liquidity ratios; (2) management efficiency and revenue statement ratios; and (3) overall profitability and combined ratios. Key ratios include the current ratio, quick ratio, gross profit ratio, return on equity, and debt-to-equity ratio. The ratios are used to evaluate factors like profitability, capitalization, operating efficiency, investments, and financial health.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    1

    THE FORMULAS OF ALL THE RATIOS

    A. FINANCIAL STABILITY, SOLVENCY, LIQUIDITY, BALANCE SHEET RATIOS


    (1) Current Ratios Pure Ratio Current Assets 2:1 - Short term stability
    Current Liabilities - Capitalisation
    - Over/Under Trading

    (2) Liquid Ratio Pure Ratio Quick Assets 1:1 - Immediate solvency
    (Quick Ratio) Quick Liabilities
    - Long term stability
    (3) Proprietory Ratio Percentage Proprietors Funds . 60% to - Capitalisation
    (Asset Backing Ratio) Fixed Assets + Current Assets 75% - Over/Under trading
    - Overall efficiency

    (4) Capital Gearing Pure Ratio Pref.Share Cap+Debenture+loan


    Ratio Or Equity Share Cap+Res None - Trading on equity
    Percentage

    (5) Stock Working Pure Ratio Closing Stock 1:1 - Investments in stocks
    Capital Ratio Or Working Capital
    Percentage

    Debt Equity Ratio Pure Ratio Long Term Debts Depends - Long term stability
    Shareholders Funds on
    industry
    OR
    Long Term Debts .
    Shareholder Funds + Long Term Debts

    B. MANAGEMENT EFFICIENCY RATIOS, REVENUE STATEMENT RATIOS:


    (7) Gross Profit Ratio Percentage Gross Profit X 100 Depends - Profitability vis-à-vis
    Net Sales on industry Sales

    (8) Operating Ratio Cost of Goods Sold + Operating Exp. X 100 - Operating Efficiency
    “ Net Sales None

    (9) Operating
    Expenses Ratios “ Operating Expenses X 100 “
    Net Sales
    (10) Group of
    Expenses Ratio “ Relevant Group of Expenses X 100 “
    Net Sales
    (11) Net Operating
    Expenses Ratio “ Operating Profit X 100 “
    Net Sales

    (12) Net Profit Ratio “ Operating Net Profit X 100 Depends - Profitability vis-à-vis
    Net Sales on industry sales

    OR
    Net Profit (before tax) X 100
    Net Sales

    (13) Stock Turnover No. of times Cost of goods sold Higher the - Over/Under Trading
    Ratio or days Average Stock better

    (Op. Stock + Cl. Stock / 2)


    2

    C. OVERALL PROFITABILITY RATIOS, COMBINED RATIOS


    (14) Return on Percentage Net Profit (before int & tax) X 100 Depends on - Profitability vis-à-vis
    Capital employed Capital Employed industry Investments

    (15) Return on Net Profit (after int & tax) X 100 Depends on - Profitability vis-à-vis
    Proprietors funds “ Proprietors funds industry Investments
    - Over/Under Trading
    Net Profit after tax & Pref Div X 100 None - Profitability vis-à-vis
    (16) Return on “ Paid Up Equity share capital Investments
    Equity Capital - Capitalisation
    - Overall Efficiency

    Net Profit (after tax) – Pref. Div. None - Profitability vis-à-vis


    (17) Earning per share Rupees No. of equity shares Investments

    None
    (18) Dividend pay out Percentage Div. per Equity share Depends on - Funds ploughed back
    Ratio Earning per Equity Share industry into business

    (19) Price Earning No. of times Market price of share - Market perception of
    Ratio Earning per share equity shares

    At least 1
    (20) Debt Service No. of times Net Profit (before tax) & int on Loan - Capacity of business
    Ratio Interest on loans + Preference Dividend + to service loans
    Annual debt installment due
    No. of days
    (21) Debtors turnover Sundry Debtors + A/c. Receivable Credit - Over/Under
    Ratio Average net credit sales X No. of days in period Investments in debtors
    the year granted to
    customers
    Credit - Promptness of
    (22) Creditors No. of days Sundry Creditors + Bills Payable period payment to creditors
    turnover Ratio Average net credit purchases X granted to
    No. of days in the year suppliers

    (23) Debt collection “ No. of days in a year - - Indicates promptness


    Period Debtors turnover in recovery of debts
    from debtors

    (24) Collection period Average Debtors X Given Days


    Credit Sales

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