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    Ratio Analysis

    Uploaded by

    Praween Bimsara
    The document defines 21 financial ratios used to analyze the financial performance and position of a company. It provides the formulas for calculating each ratio and a brief explanation of what each ratio indicates. Some key ratios include gross profit margin, net profit margin, return on equity, current ratio, inventory turnover, debt-to-equity ratio, and earnings per share.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Ratio Analysis

    Uploaded by

    Praween Bimsara
    8 views8 pages
    The document defines 21 financial ratios used to analyze the financial performance and position of a company. It provides the formulas for calculating each ratio and a brief explanation of what each ratio indicates. Some key ratios include gross profit margin, net profit margin, return on equity, current ratio, inventory turnover, debt-to-equity ratio, and earnings per share.

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    © © All Rights Reserved

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    The document defines 21 financial ratios used to analyze the financial performance and position of a company. It provides the formulas for calculating each ratio and a brief explanation of what each ratio indicates. Some key ratios include gross profit margin, net profit margin, return on equity, current ratio, inventory turnover, debt-to-equity ratio, and earnings per share.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    8 views8 pages

    Ratio Analysis

    Uploaded by

    Praween Bimsara
    The document defines 21 financial ratios used to analyze the financial performance and position of a company. It provides the formulas for calculating each ratio and a brief explanation of what each ratio indicates. Some key ratios include gross profit margin, net profit margin, return on equity, current ratio, inventory turnover, debt-to-equity ratio, and earnings per share.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Gross Profit x 100%

    1.     Gross Profit Margin


    Turnover
    Meaning : Represents the Gross profit earned as a % of the Turnover

    Gross Profit x 100%


    2.     Gross Profit Mark-up
    Cost of Sales
    Meaning : Represents the Gross profit earned as a % of the Cost of Sales

    Net Profit before Tax x 100%


    3.     Net Profit Margin
    Turnover
    Meaning : Represents the Net profit earned as a % of the Turnover

    Operating Profit x 100%


    4.     Return on Capital Employed
    Debt + Equity
    Meaning : Represents the Operating profit earned as a % of the total capital employed (which includes the whole of Long ter

    NPAT x 100%
    5.     Return on Total Assets
    Total Assets
    Meaning : Represents the Net Profit profit earned as a % of the Total Assets invested in the business

    NPAT x 100%
    6.     Return on Net Assets
    FA + CA - LTL - CL
    Meaning : Represents the Net Profit profit earned as a % of the Net Assets invested in the business

    Divisible Profit* X 100%


    7.     Return on Equity
    Equity
    Meaning : The return earned during the year for the Ordinary shareholders

    Current Assets
    8.     Current ratio
    Current Liabilities
    Meaning : shows the ability of the organsiation to service its current liabilities from its current assets

    Current Assets - inventory


    9.     Acid Test Ratio
    Current liabilities
    Meaning : shows the ability of the organsiation to service its current liabilities from its current assets minus the Stocks (inven

    Average Stocks x 365 days


    10.  Inventory turnover
    Cost of Sales
    Meaning : shows the time taken on avaregae to sell off one's stocks (inventory)

    Average Debtors x 365 days


    11.  Debtors turnover
    Credit sales
    Meaning : shows the time taken on avaregae by the trade debtors (Accounts Receivable) to settle their accounts

    Average Creditors x 365 days


    12.  Creditors Turnover
    Credit Purchases
    Meaning : shows the time taken on avaregae by the organsiation to settle its trade creditors

    13.  Working Capital Cycle Inventory Turnover days + Debtors turnover days - Creditors days

    Meaning : shows the time the organisation is out of cash due to how its stocks sell and how its debtors settle their accounts w
    company itself settles its own creditors (the no of days the organsiation needs to obtain a ank O/D for)

    Sales
    14.  Fixed Asset Turnover
    Fixed Assets
    Meaning : shows how well the investments in the company's fixed assets (Non Current Assets) are helping to generate the tu

    Sales
    15.  Asset Turnover
    Fixed Assets + Current Assets
    Meaning : shows how well the investments in the company's assets (both fixed assets and current assets0 are helping to gen

    Long Term Debt x 100%


    16.  Debt to Equity ratio
    Equity
    Meaning : shows how the organsiation has funded itself in terms of its capital structure (the relationship between Long term

    Long Term Debt x 100%


    17.  Debt Ratio
    Total Assets
    Meaning : shows how much long term assets is required to settle the Long term Debt

    Operating Profit
    18.  Interest cover
    Interest Expense
    Meaning : shows how comfortable the organsiationis at servicing its Interest cost (how many times it can pay the Interest fro

    Divisibe Porfit *
    19.  Earnings per share
    Nof Ordinary Sares
    Meaning : shows how much the organsiation has earnd for each of its ordinary shareholders

    MPS
    20.  Price Earnings ratio
    EPS
    Meaning :represents the markt price of the ordinary shares as a multiple of the earnings per share (how long it takes for an in

    DPS x 100%
    21.  Dividend yield
    MPS
    Meaning : shows the yield (or earning) based on the dividends decalred and the investment cost of the sahres for an ordinary
    1,250,000
    x 100% = 41.7%
    3,000,000

    1,250,000
    x 100% = 71.4%
    1,750,000

    250,000
    x 100% = 8.3%
    3,000,000

    350,000
    x 100% = 14.4%
    2,425,000
    udes the whole of Long term Debt & Equity)

    225,000
    x 100% = 6.9%
    3,275,000

    225,000
    x 100% = 15.0%
    1,500,000

    225,000 * The Divisible Profit has to be arrived at from ONLY the years available profits and
    x 100% = 15.0%
    1,500,000

    1,275,000
    = 1.5 : 1:0
    850,000

    675,000
    = 0:8 : 1:00
    850,000
    ets minus the Stocks (inventory)

    575,000
    x 365 = 120 days
    1,750,000

    450,000
    x 365 = 55 days
    3,000,000
    their accounts

    325,000
    x 365 = 66 days
    1,800,000

    120 + 55 - 66 = 109 days

    btors settle their accounts when compared with how the

    3,000,000
    = 1.5 times
    2,000,000
    helping to generate the turnover of the organisation

    3,000,000
    = 0.9 times
    3,275,000
    assets0 are helping to generate the turnover of the organisation

    925,000
    = 61.7%
    1,500,000
    onship between Long term Debt & Equity funds)

    925,000
    = 28.2%
    3,275,000
    350,000
    = 3.5 times
    100,000
    s it can pay the Interest from its Oeprating profits)

    225,000 * The Divisible Profit has to be arrived at from ONLY the years availa
    = 2.3 (Rs.)
    100,000

    45
    = 20 years
    2.3
    (how long it takes for an investor to recover hi/her investment at the current rate of earnings of the firm)

    0.50
    x 100% = 1.1%
    45
    f the sahres for an ordinary shareholder
    the years available profits and should NOT include previous years profits
    d at from ONLY the years available profits and should NOT include previous years profits

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