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6 views

ratio analysis

Uploaded by

alc4css25
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© © All Rights Reserved
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FINANCIAL STATEMENT

ANALYSIS
RATIO ANALYSIS
GROUPING OF RATIOS
PROFITABILITY RATIOS
LIQUIDITY RATIOS [WORKING CAPITAL RATIOS]
LEVERAGE RATOS [GEARING RATIOS]
ASSET MOVEMENT RATIOS [WORKING CAPITAL RATIO]
PAYOUT RATIOS
COVERAGE RATIOS
INVESTOR RATIOS
TURNOVER RATIOS
• CURRENT YEAR PROFITABILITY
1. Gross profit ratio [gross profit margin]
2. Net profit ratio [net profit margin]
3. Operating profit ratio [operating cost
ratio]
PROFITABILITY 4. Particular expense ratio
• OVERALL PROFITABILITY
RATIO 1. Return on capital employed
2. Return on investments [or return on
assets]
3. Return on equity
LIQUIDITY 1. Current ratio
2. Liquid ratio [quick ratio/ acid test ratio]
RATIOS 3. Absolute liquid asset ratio [cash ratio]
[WORKING CAPITAL RATIOS]
1. Debt to equity ratio
LEVERAGE 2. Debt to total fund ratio
RATIOS 3. Debt ratio
[GEARING RATIOS] 4. Equity or proprietary ratio
1. Inventory turnover (in times)
2. Inventory turnover (in days)
ASSET 3. Trade receivable turnover (in times)
MOVEMENT 4. Trade receivable turnover (in days)
RATIOS 5. Trade payable turnover (in times)
[WORKING CAPITAL RATIOS] 6. Trade payable turnover (in days)
7. Working capital turnover ratio
PAYOUT 1. Interest payout ratio
RATIOS 2. Dividend payout ratio
COVERAGE 1. Interest coverage ratio (times interest paid)
RATIOS 2. Dividend coverage ratio (times dividend paid)
INVESTOR 1. Earning per share
RATIOS 2. Price earning ratio
1. (Total) asset turnover
TURNOVER 2. Current asset turnover
RATIOS 3. Non-current asset turnover
FORMULAS
• CURRENT YEAR PROFITABILITY
• GP Ratio= (gross profit ÷ net sales) x100
• NP Ratio= (net profit ÷ net sales) x100
• Operating profit ratio= (PBIT ÷ net sales) x100
• Operating cost ratio= ((cost of goods sold+ selling expense+ administration expense)÷net sales)) x100 = (total
operating cost ÷ net sales) x 100
• Particular expense ratio= (particular expense ÷ net sales) x100

• OVERALL PROFITABILITY
• Return on capital employed= (PBIT ÷ capital employed) x 100
• Return on investment/asset= (net profit ÷ avg total assets) x100
• Return on non-current assets= (net profit ÷ avg nc assets) x100
• Return on current assets= (net profit ÷ avg current assets) x100
• Return on equity= ((net profit – preference share dividend)÷ avg SH equity) x100
LIQUIDITY RATIO/ SHORT TERM FINANCIAL POSITION RATIO/ WORKING CAPITAL RATIO
•Current ratio= (current asset ÷ current liabilities) x100 = __:1
•Liquid/ quick/ acid test ratio= (liquid assets ÷ current liabilities) = __:1
•Absolute liquid ratio/ super quick ratio/ cash ratio= absolute liquid assets ÷ current liabilities
•Net working capital= current assets – current liabilities

LEVERAGE RATIO
•Debt to equity ratio= (long term liability + preference shares) ÷ (common share capital +reserves)
•Debt to total fund ratio= debt ÷ (debt + equity = total fund)
•Debt ratio= (debt ÷ total assets) x100
•Equity or proprietary ratio= (common shareholder's equity ÷ total assets) x100

ASSET MOVEMENT RATIO


•Inventory/Stock turnover ratio (in times)= cost of goods sold ÷ average inventory
•Inventory/Stock turnover ratio (in days)= number of working days in a year ÷ inventory turnover (in times)
•Trade receivables/debtor turnover (in times)= credit sales ÷ average debtors
•Trade receivables turnover/ debtor index/days debtors/ avg collection period/ debtor velocity= (avg debtor ÷ credit
sales) x365 OR number of working days ÷ debtor turnover in times
•Trade payable turnover/ creditor velocity (in times)= credit purchases ÷ average creditors
•Trade payable turnover (in days)= no. of working days in a year ÷ avg trade payable OR (avg tr payable ÷ cr
purchases) x no of working days
•Working capital turnover ratio= sales ÷ net working capital
PAYOUT RATIOS
• Interest payout = (annual interest expense÷ PBIT) x100
• Dividend payout ratio= (common share dividend ÷ profit attributed to
common shareholders) x100

TURNOVER RATIOS
• Total assets/ asset turnover= (sales÷ avg total assets)
• Current asset= net sales ÷ average current assets

COVERAGE RATIOS
• Interest coverage ratio= PBIT ÷ annual interest expense
• Dividend coverage ratio= profit attributable to common shareholders or
net profit ÷ annual dividend payment

INVESTOR RATIOS
• Earnings per share= profit attributable to common shareholders or net
profit ÷ number of CSH subscribed/issued
• Price earning ratio= market price per share ÷ earning per share

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