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Amit Coaching Classes: New Gobind Pura, Delhi - 110051 PH - No.9899833754, 9212567102 Chapter: Accounting Ratios

The document provides definitions and formulas for 15 key accounting ratios used to analyze financial performance and position. The ratios are categorized into 4 groups: (1) Profitability ratios to measure operating efficiency, (2) Turnover ratios to measure how efficiently assets/capital are used, (3) Short-term solvency/liquidity ratios to assess ability to meet short-term obligations, and (4) Long-term solvency/liquidity ratios to evaluate ability to meet long-run obligations. Formulas include numerators like net profit, inventory, and debt levels and denominators like sales, assets, and equity.

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36 views3 pages

Amit Coaching Classes: New Gobind Pura, Delhi - 110051 PH - No.9899833754, 9212567102 Chapter: Accounting Ratios

The document provides definitions and formulas for 15 key accounting ratios used to analyze financial performance and position. The ratios are categorized into 4 groups: (1) Profitability ratios to measure operating efficiency, (2) Turnover ratios to measure how efficiently assets/capital are used, (3) Short-term solvency/liquidity ratios to assess ability to meet short-term obligations, and (4) Long-term solvency/liquidity ratios to evaluate ability to meet long-run obligations. Formulas include numerators like net profit, inventory, and debt levels and denominators like sales, assets, and equity.

Uploaded by

Disha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Accounting 12th PAGE NO:

Amit Coaching Classes


New Gobind Pura, Delhi – 110051
Ph.No.9899833754, 9212567102

Chapter: Accounting Ratios


S.NO. NAME OF THE RATIO FORMULA NUMERATOR DENOMINATOR REMARKS
A) Profitability Ratios
1 Goss Profit Ratio Gross Profit X 100 Gross Profit = Net Sales - Cost Of Sales/COGS Net Sales = Total Sales - Sales Return %
Net Sales Cost of Sales = Opening Stock + Net Purchases Total Sales = Cash Sales + Credit Sales High Better
+ Direct Expenses - Closing Stock
2 Net Profit Ratio Net Profit X 100 Net Profit = Gross Profit+Indirect Income - Net Sales = Total Sales - Sales Return %
Net Sales Indirect Expenses Total Sales = Cash Sales + Credit Sales High Better
3 Operating Ratio Operating Cost X 100 Cost of Goods Sold + Operating Expenses Net Sales = Total Sales - Sales Return %
Net Sales Operating Expenses = Office Expenses+Selling Total Sales = Cash Sales + Credit Sales Low Better
Exp + Administrative Expenses+ Depreciation
4 Operating Profit Ratio Operating Profit X 100 Net Sales -Cost of Sales OR Net Sales = Total Sales - Sales Return
Net Sales Gross Profit - Operating Expenses Total Sales = Cash Sales + Credit Sales

5 Return on Investment(ROI) Profit Before Interest Tax X 100 Sales XXXXX Fixed Assets + Investment + Net Working Capital %
Or Capital Employed Less: Cost of Goods Sold (XXXX) Or High Better
Return on Capital Gross Profit XXXX Share Capital + Reserve & Surplus - Misc. Expend. Measurement of
Employed (ROCE) Less: Indirect Expenses (XXX) + Long Term Loan Overall Profit
Add: Non Operating Income XXXX of Business
Profit Before Income Tax XXX
Or
Profit After Tax + Tax + Interest

AMIT COACHING CLASSES ACCOUNTING-COSTING-TAX-F.M PH 9899833754 -9212567102


Accounting 12th PAGE NO:
S.NO. NAME OF THE RATIO FORMULA NUMERATOR DENOMINATOR REMARKS
II Turnover based / Activity Based Ratios/ Performance Based Ratios
6 Stock Turnover Ratio Cost of Goods Sold Opening Stock + Net Purchases + Direct Expenses - Opening Stock + Closing Stock Times
/Inventory Turnover Ratio Average Inventory Closing Stock Or Net Sales - Gross Profit 2 High

Trade Payable Turnover/


7 Creditors Turnover Ratio Net Credit Purchase Total Purchase - Cash Purchases - Purchase Return Op Balance of Creditors & Bills Payable Times
Average Accounts Payable + High Better
Closing balance of Creditors & Bills Payable
2
8 Debtors Collection Period 365 days or 12 Months Days / Month
Trade Rec Turnover Ratio Low Better
9 Trade Receivable Turnover Net Credit Sales Total Sales - Cash Sales - Sales Return (invward) Opening Debtors & BR + closing Debtors & BR Days / Month
/Debtors Turnover Ratio Average Trade Receivable 2 Low Better

10 Working Capital Turnover Net Sales Cash Sales + Credit Sales - Sales Return Current Assts - Current Liabilities Times
Ratio Net Working Capital High Better

c) Short Term Solvency Ratios / Short Term liquidity Ratios / Short Term Financial Position
Total Assets - NCA (FA +Investment) or
11 Current Ratio Current Assets Cash, Bank, Stock, Debtors, Bill Receivable, Prepaid Creditors, Bills Payable, Bank Overdraft, Provision :
Current Liabilities Expenses, Marketable Securities, Accrued Income, for Tax, O/s Expenses, Advance Income, Unclaimed Ideal 2:1
Short Term Investment Dividend or Total Debt - Non current Liab.

AMIT COACHING CLASSES ACCOUNTING-COSTING-TAX-F.M PH 9899833754 -9212567102


Accounting 12th PAGE NO:

S.NO. NAME OF THE RATIO FORMULA NUMERATIOR DENOMINATOR REMARKS


12 Quick Ratio / Liquid Ratio Liquid Assets Current Assets - Stock - Prepaid Expenses Total Liab - Long Term Liab :
Acid Test Ratio Current Liabilities 1:1

d) Long Term Sovency Ratios/ Long Term Liquidity Ratios / Long Term Financial Ratios
13 Debt-Equity Ratio Long Term Debt Debentures+Bank Loan+ Loan from IDBI etc Share Capital + Reserves - Misc Expenditure :
Equity or Total Debt - Current Liab or TL-SF-CL Ideal Ratio 2:1
Share Capital + Reserves - Misc Expenditur Non Current Assets + Current Assets Or
14 Proprietary Ratio Proprietor Fund or Total Liab-NCL-CL Fixed Assets + Investments + Current Assets :
Total Assets Or Shareholder Fund + Non Current Liab+C.Lia High Better

15 Total Assets to Debt Total Assets Fixed Assets + Investments + Current Asset Debentures, Bank Loan, Loan from IDBI, :
Debt
16 Interest Coverage Ratio Profit before Interest Tax PAT + Tax + Interest Loan X Rate Times
Debt Service Ratio Interest on Loan Or Gross Profit - Operating Expenses High Better

AMIT COACHING CLASSES ACCOUNTING-COSTING-TAX-F.M PH 9899833754 -9212567102

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