Ratio Formulas

Formula Sheet
Ratios
Profitability Ratios:
Gross Profit Margin
= (Sales – Cost of goods sold) / Sales * 100 or,
Gross profit / Sales * 100
Net Profit Margin

Net profit before interest and tax
-------------------------------------- x 100
Sales
Cash profit ratio
(Cash profit)/ Sales x 100
Cash profit = Net profit + Depreciation
Return on Total Assets:

Net Profit after Tax
-------------------------------------- x 100
Total assets
Return on Shareholders Funds or Return on Net worth
(Net profit after Interest and Tax) / Net worth x 100
Net worth = Equity capital + Reserves and Surplus
Interest Cover
Profit before interest, depreciation and tax
Interest
Debt Service Coverage Ratio (DSCR)
Profit after tax + Depreciation + Interest on Loan

-----------------------------------------------------------------------
Interest on Loan + Loan repayment in a year
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Operating Ratios
Materials Cost Ratio = (Materials consumed) / Sales * 100
Labour Cost Ratio = (Labour cost) / Sales * 100
Factory overhead ratio = Factory expenses / Sales * 100
Administrative Expenses Ratio = Administrative expenses / Sales * 100
Selling & distribution expenses Ratio= (Selling and Distribution Expenses) / Sales
Operating ratio = (Cost of goods sold + Operating expenses) / Net sales
Stock turnover ratio = Cost of goods sold / Average inventory
Debt collection period = Debtors + Bills receivables / Average daily credit sales
Creditors’ velocity = Creditors + Bills payable / Average daily credit purchases
Working capital turnover ratios = Cost of goods sold / Working capital
Fixed asset turnover ratio = Cost of goods sold / Fixed assets
LIQUIDITY RATIOS
Current ratio:
Current assets, loans and advances

Current Ratio -------------------------------------------------------
Current Liabilities and Provisions
Quick Liquid/ Acid Test Ratio:
Current Assets, Loans and Advances – Inventories

-----------------------------------------------------------------------------
Current Liabilities & Provisions – Bank Overdraft
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Absolute Liquid/ Super Quick Ratio
Absolute Liquid Assets

---------------------------
Current Liabilities
Defensive Interval Ratio:
Liquid Assets
-----------------------------------------
Projected Daily Cash Requirement
Where Projected Daily Cash Requirement = Projected Cash operating Expenditure /

Number of days in a year.
Liquid Assets = Cash + Marketable Securities + Debtors
Earnings per share (EPS) = Net profit after tax and preference dividend
---------------------------------------------------------
No. of Equity shares
Cash earning per share = Net profit after tax + depreciation / No. of equity shares
Dividend Payout Ratio = Dividend per share/ earnings per share
Dividend Yield = Dividend per share / market price
Book Value = Equity capital + Reserves – P&L A/c Debit Balance

------------------------------------------------------------------------
Total number of equity shares
Price earnings Ration( P/E Ratio)
Current market price of equity shares

------------------------------------------
Earnings per share
Market Price to Book Value Ratio (P/BV ratio)
Market price per share

--------------------------
Book value per share
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LEVERAGE RATIOS
Debt equity Ratio

Long term debt
------------------
Shareholders funds
Shareholders Equity Ratio
Shareholders’ Equity
-----------------------------
Total Assets (tangible)
Long term debt to shareholders New Worth Ratio
Long term debt

----------------------------------
Shareholders Net worth
Capital Gearing Ratio
Fixed Interest bearing’s Funds

-----------------------------------
Equity Shareholder’s Funds
Fixed Assets to Long term Funds Ratio
Fixed Assets
----------------------
Ling term Funds
Proprietary Ratio
Shareholders Net worth
-----------------------------
Total Assets
Reserves to capital ratio = Reserves / Share capital
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CVP Analysis
When information is given per unit
1) Break Even Point in units = Fixed Cost

Contribution per Unit.
Where, Contribution is = Selling Price – Variable cost.
2) Break Even Sales Volume = Fixed Cost * Selling Price Per Unit
Contribution Per unit
3) No. of. Units to be sold to earn a

Required Profit = Fixed cost + Profit
Contribution per Unit
When information is given in Volume
4) P.V. Ratio = Contribution * 100

Sales
(Or)
Difference in profit * 100
Difference in Sales
5) Break Even Point = Fixed Cost

P.V. Ratio
6) Margin of Safety = Actual Sales

Break Even Sales
7) Sales to earn a required Profit = Fixed Cost + Profit

P.V. Ratio
8) Profit at a given level of sales = Margin of safety * P.V. Ratio.
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Material Variances
1) Direct Material Cost Variances = Standard Quantity for Actual output *

Standard Price – Actual Quantity * Actual Price
2) Direct Material Usage Variances = (Standard Quantity – Actual Quantity)

*Standard Price.
3) Direct Material Price Variances = (Standard Price – Actual Price) * Actual

Quantity.
4) Direct Material Mix Variance = (Revised standard Quantity – Actual

Quantity) * Standard Price
Revised Std Quantity = Std. Quantity of Particular Material *Total Actual Quantity
Total Standard Quantity
5) Direct Material Yield Variance -
On the basis of loss

Std Loss on actual input – Actual loss (Average std Price per unit)
On the basis of output

Std Output for actual input – Actual output (Average std Price Per unit)
Average std price per unit = Total std cost

Standard output
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Ratio Formulas

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Formula Sheet

Gross profit / Sales * 100

Net Profit Margin

Cash profit ratio

(Cash profit)/ Sales x 100

Cash profit = Net profit + Depreciation

Return on Total Assets:

Return on Shareholders Funds or Return on Net worth

(Net profit after Interest and Tax) / Net worth x 100

Net worth = Equity capital + Reserves and Surplus

Debt Service Coverage Ratio (DSCR)

Profit after tax + Depreciation + Interest on Loan

Labour Cost Ratio = (Labour cost) / Sales * 100

Factory overhead ratio = Factory expenses / Sales * 100

Administrative Expenses Ratio = Administrative expenses / Sales * 100

Operating ratio = (Cost of goods sold + Operating expenses) / Net sales

Stock turnover ratio = Cost of goods sold / Average inventory

Creditors’ velocity = Creditors + Bills payable / Average daily credit purchases

Working capital turnover ratios = Cost of goods sold / Working capital

Fixed asset turnover ratio = Cost of goods sold / Fixed assets

Current assets, loans and advances

Quick Liquid/ Acid Test Ratio:

Current Assets, Loans and Advances – Inventories

Absolute Liquid Assets

Defensive Interval Ratio:

Where Projected Daily Cash Requirement = Projected Cash operating Expenditure /

Liquid Assets = Cash + Marketable Securities + Debtors

Dividend Payout Ratio = Dividend per share/ earnings per share

Dividend Yield = Dividend per share / market price

Book Value = Equity capital + Reserves – P&L A/c Debit Balance

Price earnings Ration( P/E Ratio)

Current market price of equity shares

Market Price to Book Value Ratio (P/BV ratio)

Market price per share

Debt equity Ratio

Shareholders Equity Ratio

Long term debt to shareholders New Worth Ratio

Long term debt

Capital Gearing Ratio

Fixed Interest bearing’s Funds

Fixed Assets to Long term Funds Ratio

Reserves to capital ratio = Reserves / Share capital

1) Break Even Point in units = Fixed Cost

Where, Contribution is = Selling Price – Variable cost.

3) No. of. Units to be sold to earn a

When information is given in Volume

4) P.V. Ratio = Contribution * 100

5) Break Even Point = Fixed Cost

6) Margin of Safety = Actual Sales

7) Sales to earn a required Profit = Fixed Cost + Profit

8) Profit at a given level of sales = Margin of safety * P.V. Ratio.

1) Direct Material Cost Variances = Standard Quantity for Actual output *

2) Direct Material Usage Variances = (Standard Quantity – Actual Quantity)

3) Direct Material Price Variances = (Standard Price – Actual Price) * Actual

4) Direct Material Mix Variance = (Revised standard Quantity – Actual

5) Direct Material Yield Variance -

On the basis of loss

On the basis of output

Average std price per unit = Total std cost

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