1. Module
Accounting & Finance
Topic
Ratio Analysis

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

3. Liquidity Ratios
Current Ratio
Quick Ratio

4. Liquidity
Current Assets
Current Ratio =
Current Liabilities

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

6. Profitability Ratios
Net Profit Margin
Gross Profit Margin
ROCE

7. Profitability
Net profit
Net Profit Margin =
X 100
Net Sales

8. Profitability
Gross profit
Gross Profit Margin =
X 100
Net Sales

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

10. Shareholders Ratios

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

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

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

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

15. Efficiency Ratios

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

17. Efficiency
Debtors
Debtors days =
X 365
Credit sales

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

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

20. Liquidity
Profitability
Shareholders
END
Efficiency