A) LIQUIDITY RATIOS - SHORTTERM SOLVENCY RATIO FORMULA NUMERATOR DENOMINATOR 1.Current Ratio Current Assets / Inventories Sundry Crs (for Goods) Current Liabilities + Debtors + OS Expn ( for Service) + Cash & Bank + Bank OD / CC + Receivables + Provision for Tax + Short Term Loans + Proposed / Unclaimed Dividend + Marketable Investments 2. Quick Ratio or Acid test Ratio Quick Assets / Current Assets Current Liabilities Quick Liabilities Less : Inventories Less : Bank OD / CC Less : Prepaid Expenses 3. Absolute Cash Raio (Cash + Marketable Securities) / CL Cash in Hand As above Cash at Bank Maketable Securities Short Term Investments 4. Interval Measure Quick Assets / Cash Expenses Per Day As above Annual Cash Expenses / 365 Cash Expenses = Total Expn - Depn - W/off B) CAPITAL STRUCTURE RATIOS / INDICATOR OF FINANCING TECHNIQUES & LONG TERM SOLVENCY 1. Equity to Total Funds Ratio Shareholder's Funds / Total Funds Equity Share Capital Total Long Term funds employed + Preference Share Capital Debt + Equity + Reserves & Surplus Less : Accumulated Losses 2. Debt Equity Ratio Debt / Equity Long Term Borrowed Funds Equity Share Capital Debentures + Preference Share Capital Long Term Loans + Reserves & Surplus Less : Accumulated Losses 3. Capital Gearing Ratio Fixed Charge Bearing Capital / Equity Shareholder's Funds Preference Share Capital Equity Share Capital + Debentures + Reserves & Surplus + Long Term Loans Less : Accumulated Losses 4. Fixed Asset to Long Term Fund Ratio Fixed Assets / Long Term Funds Net Fixed Assets Shareholder's Fund (Equity) Gross Block Debt Less : Cum Depreciation 5. Proprietary Ratio Proprietary Funds / Total Assets Equity Share Capital Net Fixed Assets + Preference Share Capital + Total Current Assets + Reserves & Surplus (only Tangible assets will be included) Less : Accumulated Losses Note : Liability Route (ESC + PSC + Reserves & Surplus Less Accumulated Losses) Assets Route ( Net Fixed Assets + Net Working Capital Less Longterm Liability) C) COVERAGE RATIOS - ABILITY TO SERVE FIXED LIABILITIES 1. Debt Service Coverage Ratio Earnings for Debt Service / (Interest + Instalment) NP After Tax Interest Add : Tax Add : Instatment of Debt Add : Interest (Principal repaid) Add : Non Cash Expn (Depn) Add : Non Operating Adj (loss on sale of FA) 2. Interest Coverage Ratio EBIT / Interest Sales Less Varial & Fixed Cost Interest (Excluding Interest) EAT + Tax + Interest 3. Preference Dividend Coverage Ratio EAT / Preference Dividend Earnings After Tax Dividend on Preference Share Capital D) TURNOVER / ACTIVITY / PERFORMANCE RATIOS 1. Capital Turnover Ratio Sales / Capital Employed Sales net of returns Net FA + Net WC (Asset Route) ESC + PSC + Reserves & Surplus + Debenture & LT Loans Less Accumulated Losses Less Non Trade Investments (Liability Route) 2. Fixed Asset Turnover Ratio Turnover / Fixed Assets Sales net of returns Net Fixed Assets 3. Working Capital Turnover Ratio Turnover / Net Working Capital Sales net of returns CA Less CL 4. Finished Goods or Stock Turnover Ratio COGS / Average Stock Opening Stock + Purchases - Closing Stock (Opening + Closing) / 2 or (Max + Min Stock) / 2 5. WIP Turnover Ratio Factory Cost / Average Stock of WIP Material + Wages (Open WIP + Close WIP) / 2 + Production OHS 6. Raw Material Turnover Ratio COMC / Average Stock of RM Opening Stock of RM + Purchases - Closing Stock (Opening + Closing) / 2 7. Debtors Turnover Ratio Credit Sales / Average Accounts Receivable Credit Sales net of returns Debtors + B/R (Opening + Closing) / 2 8. Creditors Turnover Ratio Credit Purchases / Avg Accounts Payable Credit Purchase net of returns Creditors + B/P (Opening + Closing) / 2 E) PROFITABILITY RATIOS BASED ON SALES 1. Gross Profit Ratio Gross Profit / Sales Gross Profit Sales net of returns 2. Operating Profit Ratio Operating Profit / Sales Sales Less Cost of Sales (or) Sales net of returns Net Profit Add : Non Operating Expn Less : Non Operating Income 3. Net Profit Ratio Net Profit / Sales Net Profit Sales net of returns 4. Contribution Sales Ratio Contribution / Sales Sales Less Variable Cost Sales net of returns F) PROFITABILITY RATIOS OWNER'S VIEW POINT 1.ROI or ROCE Total Earnings / Total Capital Employed Profit After Tax Net FA + Net WC (Asset Route) Add : Tax ESC + PSC + Reserves & Surplus + Debenture & LT Loans Less Accumulated Losses Less Non Trade Investments (Liability Route) Add : Interest Add : Non Trading Expn Less : Non Operating incomes (Rent, Interest & Dividend) 2. ROE EAT / Net Worth Profit After Tax Net Fixed Assets + Net WC Less : External Liabilities (Long Term) 3. EPS (PAT - Preference Dividend) / No of Equity Shares Profit After Tax Equity Share Capital / Face Value per Share Less : Preference Dividend 4. DPS Dividends / No of Equity Shares Profits distributed to Equity shareholders Equity Share Capital / Face Value per Share 5. ROA NP after Tax / Average Total Assets Net Profit After Tax Avg Total Assets or Tangible or Fixed (Opening + Closing / 2)
Saturday, January 22, 2011
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