Module Accounting & Finance Topic Ratio Analysis

Formulae for Ratio Analysis Liquidity Formulae for Ratio Analysis Profitability Shareholders Efficiency

Liquidity Ratios Current Ratio Quick Ratio

Liquidity Current Assets Current Ratio = Current Liabilities

Current Assets- Stock Quick Ratio = Current Liabilities Liquidity Note: Quick ratio is also called Acid test ratio

Profitability Ratios Net Profit Margin Gross Profit Margin ROCE

Profitability Net profit Net Profit Margin = X 100 Net Sales

Profitability Gross profit Gross Profit Margin = X 100 Net Sales

Net Profit before Interest & Tax ROCE = Capital Employed Profitability Net Profit before Interest & Tax ROCE = X 100 Capital Employed ROCE =Return on Capital Employed

Shareholders Ratios

Profit after preference dividend ROE = Equity Funds Shareholders Profit after preference dividend ROE = Equity Funds

Profit after preference dividend EPS = Number of Equity Shares Shareholders Profit after preference dividend EPS = Number of Equity Shares EPS = Earnings per Share

Dividends paid to Equity Shareholders DPS = Number of Equity Shares DPS = Dividends per Share

Dividends per share Dividend Yield = Market price per share Shareholders Dividends per share Dividend Yield = X 100 Market price per share

Efficiency Ratios

Cost of sales Average Stock Efficiency Cost of sales Stock turnover = Average Stock

Efficiency Debtors Debtors days = X 365 Credit sales

Creditors X 365 Credit Purchases Efficiency Creditors Creditors payment period = X 365 Credit Purchases

Loan capital + Preference capital Gearing Ratio = X 100 Capital Employed Loan capital = Long term loan + Debentures

Liquidity Profitability Shareholders END Efficiency