RATIO

Gross Profit Ratio

Net profit ratio
Debt- Equity ratio
Current ratio
Quick ratio

FORMULA
(Sales - COGS)/ Sales
Net Profit/Sales
Debt/Equity
Current Assets/Current Liabilities
Quick Assets/Quick Liabilities
(CA-Stock)/Quick Liabilities

CALCULATION
(3000000-200000)/3000000
300000/3000000
250000/500000
600000/200000
(600000-200000)/200000

ANSWER
33.33%
10%
1:2
3:1
2:1

RATIO
Gross Profit Ratio
Stock Turnover Ratio
Debtors Turnover Ratio

FORMULA
(Sales - COGS)/ Sales
COGS/AVG. Stock
Turnover/Avg.Debtors

CALCULATION
(600000-480000)/600000
480000/(116000+124000)/2
600000/64000

ANSWER
20.00%
4 times
9.375 times

Calculating COGS
10,000

Stock at the beginning of the year

ADD:
Carriage
Purchases

2,500
25,000
37,500

Less:
Stock at the end of the year
COGS
Stock Turnover Ratio

5,000
32,500
COGS/AVG. Stock

32500/(10000+5000)/2

4.333 times

Calculation of Equity
Equity Share Capital
Preference Share Capital
General Reserve
Accumulated Profits
Less:
Preliminary Expenses to be Written-off
Equity
Debentures
Debt Equity Ratio = Debt/Equity = 75000/175000=

Rs.
75,000
25,000
50,000
30,000
-5,000
175,000
75,000
3:7

Calculation of Total Assets

Equity Share Capital
Preference Share Capital
General Reserve
Accumulated Profits
Debentures
Creditors
O/s Expenses
Less:
Preliminary Expenses to be Written-off
Total Assets(TA)
Total Assets to Debt ratio = TA/Debt= 300000/75000=
Proprietory Ratio = Equity/ Total Assets = 175000/300000=

75,000
25,000
50,000
30,000
75,000
40,000
10,000
-5,000
300,000
4 times
7:12

2013
Calculating COGS
Sales
Less: GP (25%)
COGS

2400000
600000
1800000

Stock Turnover Ratio

COGS/AVG. Stock

1800000/(600000+900000)/2

2.4 times

Debtors Turnover Ratio

Turnover/Avg. Debtors

2400000/(500000+560000)/2

4.53 times

RATIO
Gross Profit Ratio
Inventory Turnover Ratio
Current ratio
Quick ratio
Net Profit Ratio
Working Capital ratio

FORMULA
(Sales - COGS)/ Sales
COGS/AVG. Stock
Current Assets/Current Liabilities
Quick Assets/Quick Liabilities
(CA-Stock)/Quick Liabilities
profit/sales
Sales/ (CA-CL)

CALCULATION
(2520000-1920000)/2520000
1920000/800000
760000/600000
(760000-80000)/600000
360000/2520000
2520000/(760000-600000)

ANSWER
23.80%
2.4
1.266667
1.133
0.142857
15.75

Balance Sheet
Mar '08
12 mths
Sources Of Funds
Equity Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Fixed Deposits
Cash and Bank Balance
Loans and Advances
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value
Market Price
Sales Turnover
Operating Profit
PBDIT
Interest
PBDT
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
WN
PBIT
PBT

58
9471
26
9555
309
3275
3584
13139
Mar '08
4,189
1,242
2,946
699
6,922
4,306
7,365
185
780
3,861
16,496
11,893
2,035
13,928
2,568
3
13,139

Mar '09 Leverage

12 mths debt-equity ratio

debt/equity
117 BF/OF
12318 Interest
25 PBIT/INT
12460
1102
5454
6556
19016
Mar '09

5,575
1,421
4,154
1,041
8,264 Liquidity
5,805 Current Ratio
10,056 CA/ CL
82
693
7,199
23,835
15,211
3,067
18,278
5,557
0
19,016

1014

1372

326

212

2000

1649.3

25,280
3,239
3,856
502
3,354
3,155
982
2,173

34,250
4,142
5,755
770
4,985
4,658
1,176
3,482

3,657
3,155

Coverage Ratio

PROFITABILITY
EBIDTA
EBIDTA/SALES
NPM
NPAT/SALES
ROCE or ROI
PBIT/Cap Empl

5,428
4,658 RONW or ROE

38%
3584
9555
7.28
3,657
502

1.184377
16,496
13,928

15%
3,856
25,280
9%
2,173
25,280
28%
3,657
13139
23%

INTEREST

502

770 PAT/NW
EPS
PAT/No of equity shares
P/E RATIO
Price/EPS
TURNOVER RATIOS
FA Turnover ratios
sales/FA
Inventory Turnover ratios
sales/inventory
days of inventory
inventory/(sales/365)

2,173
9555
37.46552
2,173
58
53.38242
2000
37.46552
8.58
25,280
2,946
5.87
25,280
4,306
62
4,306
69.26027

53% INCREASE
6556
12460
7.05
5,428
770

1.304027 INCREASE
23,835
18,278

17% INCREASE
5,755
34,250
10%
3,482
34,250
29%
5,428
19016
28%

3,482
12460
29.76068
3,482
117
55.41875
1649.3
29.76068
8.25
34,250
4,154
5.90
34,250
5,805
62
5,805
93.83562

Liquidity And Solvency Ratios

Current Ratio
Quick Ratio
Debt Equity Ratio
Long Term Debt Equity Ratio

1.28
1.69
0.69
0.53

1.46
1.54
0.6
0.5

Profitability Ratios
Operating Profit Margin(%)
Profit Before Interest And Tax Margin(%)
Gross Profit Margin(%)

10.26
3.02
3.11

20.54
13.82
14.22

Management Efficiency Ratios

Inventory Turnover Ratio
Debtors Turnover Ratio
Investments Turnover Ratio
Fixed Assets Turnover Ratio
Total Assets Turnover Ratio
Asset Turnover Ratio

23.24
9.23
23.24
0.62
0.61
0.62

25.93
8.79
25.93
0.69
0.7
0.69

Q2
The summarised Balance Sheet of Optica Cables Ltd. is given below with other relevant details:
Balance Sheet
Liabilities
Rs.
Assets
Equity capital
Reserves and surplus
Sundry creditors
Loan 11%

4000000
600000
1250000
200000

Fixed assets (net)

Preliminary Exp
Cash
Debtors
Inventories

6050000
Other information:
Sales
Less: Cost of Production of goods sold
Less: Selling and administration
Net Operating Profit
The current industry average of a few important ratios is given below:
Current ratio
1.4 CA/CL
ROI
24 NOP/E+D
FA turnover
9 TURN/FA
ROE
42
Liquid ratio
1.2
Debtors turnover
8
Inventory turnover
10.2
GP Ratio
25
Debt Equity
0.54
Operating Ratio
85
NP Ratio
14
Asset TO Ratio
2.7

Calculate the above ratios, compare the same with the industry average and comment briefly.

levant details:

ent briefly.

Rs.
2800000
50000
240000
1860000
1100000
6050000
(Rs.)
7500000
4600000
2900000
1250000
1650000
2.56
0.34375
2.67857143

Solution
Current Ratio
Quick Test
EBIT(%)
Net Profit Margin NPM(%)
Return on Capital Employed/Return on Investment
ROCE(%)
Return on Total Assets ROTA(%)
Return on Equity ROE(%)
Earnings per Share EPS `
Asset Turnover
Accounts Receivable Turnover
Average Collection Period (days)
Debt - Equity Ratio
Price/Earnings PE Ratio

Dec '09
Dec '10
Positive/ Negative
1.124324 1.40535
0.28102547
1.124324 1.40535
0.28102547
31.60286 35.21614
3.61328304
0.252433 0.312968
0.060534815
0.193407
0.149478
15.46105
14.96154
0.47299
2.756708
132.4043
0.000795
32.34961

0.19064
0.165538
16.94757
14.28947
0.470062
5.102941
71.52738
0.000312
31.49171

-0.002767841
0.016059587
1.486516258
-0.00292725
2.346232769
-60.87690541
-0.000482803
-0.857901689