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Debit: Cash / Bank Account Credit: Share Capital Account

This document defines and provides formulas for several common financial ratios used to analyze a company's financial health and performance: 1) Depreciation is calculated as the original cost minus the salvage value divided by the number of years of useful life. 2) Retained earnings transferred to the balance sheet is the opening balance plus net profit for the year minus dividends. 3) Current ratio is calculated as current assets divided by current liabilities. 4) Return on total assets is operating income divided by average assets multiplied by 100.

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Akram Hussain
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82 views

Debit: Cash / Bank Account Credit: Share Capital Account

This document defines and provides formulas for several common financial ratios used to analyze a company's financial health and performance: 1) Depreciation is calculated as the original cost minus the salvage value divided by the number of years of useful life. 2) Retained earnings transferred to the balance sheet is the opening balance plus net profit for the year minus dividends. 3) Current ratio is calculated as current assets divided by current liabilities. 4) Return on total assets is operating income divided by average assets multiplied by 100.

Uploaded by

Akram Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Depreciation = Original cost - salvage value/ Number of years of useful life

Retained earning transferred to B/Sheet = Opening balance + Net Profit for the year – Dividends
Book value per share common stock= Common stockholders equity /Number of common share
Book value/share: preferred stock= call price/redemption value / Number of preferred share
Current ratio = Current assets / Current liabilities
Quick ratio(Acid Test Ratio)=Current assets- Inventories/ Current Liabilities
Cash Ratio = Cash Equivalents + Marketable Securities/ Current Liabilities
Inventory Turnover Ratio (ITO)=Cost of good sold for the year/ Average inventory during the year
Days required to sell inventory (Converting inventory into Receivables) = 365 or 300/ ITO
Receivable Turnover Ratio = Net Credit Sale for the year / Average Receivables during the year(Monthly AV RECE)
Dividend Coverage Ratio = Net income/ Amount of annual preferred dividend
Return on total assets = Operating income/ Average assets * 100
Return on Investment = Operating income/ (Total Assets) Stockholders equity + fixed liabilities * 100
Simple ROI = Gains – Investments costs/ Investments Costs
Return on Sales = Net income/ Net sales *100
Assets turn over ratio= Net Sales/ Average assets

Shares issued against cash: Shares issued against transfer of asset:


 Debit: Cash / Bank Account Debit: Asset Account
 Credit: Share Capital Account Credit: Share Capital Account
Gross profit ratio = Gross Profit/ Net sales *100
Net Profit ratio = Net Profit/ Net sales * 100
Operating Profit ratio = Operating Profit/ Net sales * 100
Expenses ratios = Individual Expenses/ Net sales * 100
Operating (Cost) Ratio = Operating cost/ Net sales * 100
Net Profit to net worth ratio= Net Profit after inteerest and tax/ Net sales * 100
Return on capital employed (ROI) = Net Profit before interest, tax/ Capital employed * 100
Earning per share = Net profit avaiable for equity shareholders/ Number of equity shares
Dividends per share= Dividend amunt/ Number of equity shares
Capital employed turover ratio= Cost or sales/Capital employed
Fixed assets turnover ratio = Cost of sales or sales/ Fixed assets
Working capital turnover ratio = Cost of sales or Net sales/ Net working capital
Inventory turnover ration= Cost of goods and sold/ Average accounts receivables
Debtors (receivables) turnover ratio= Annual net credit sales/ Average accounts receivables
Debtors (receivables) collection period= Accounts receivables/ Average accounts receivables
Creditors trnover ratio= Net credit pruchases/Average creditors
Average credit period= Average accounts payables/ Net credit purchase per day
Debt to net worth= Total long term debt/ Shareholder’s funds
External-internal equity= External equity/ Internal equity
Debt vs. funds= Total long term debts/ Total long term funds
Debt service ratio= Earnings before interest and taxes/ Fixed interest charges
Fixed assets ratio= Net fixed assets/ Long-term funds
Solvency (Debt to total funds)ratio= Total liabilities/ Total assets
Capital gearing ratio= Equity/ fixed interest bearing securities
Proprietary ratio= Proprietor’s funds/ Total assets
Debt –To-Total-Assets = Total outside liabilities (Debt)/ Total assets (total liabilities +shareholders funds)
Equity ratio = Total stockholders equity (including preferred stock)/ Total assets (total liabilities + shareholders funds)
Debt-To- Equity = Total debt (including current liabilities)/ shareholders’ equity
Return on Common Stockholder’s equity=Net income applicable to common stock/ Common stockholder’s equity * 100
Earning per share of comon stock=Net income applicable to comon shareholders/ Number of comon shares outstanding
Price-earning ratio (P/E) = Market price per share/ Earning per share
Dividend yield = Dividend per share/ Market price per share * 100

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