A) LIQUIDITY RATIOS - SHORTTERM SOLVENCY

1 Current Ratio 2 : 1
2 Quick Ratio or Acid Test Ratio 1.33 : 1
3 Absolute Cash Ratio
4 Interval Measure

B) CAPITAL STRUCTURE / LONGTERM SOLVENCY / INDICATOR OF

FINANCING TECHNIQUES
1 Equity to Total Funds Ratio
2 Debt Equity Ratio 2 : 1
3 Capital Gearing Ratio
4 Fixed Assets to Long Term Fund Ratio <1
5 Proprietary Ratio

C) COVERAGE RATIO - ABILITY TO SERVE FIXED LIABILITIES

1 Debt Service Coverage Ratio 2 to 3 times
2 Interest Coverage Ratio >1
3 Preference Dividend Coverage Ratio

D) TURNOVER / ACTIVITY / PERFORMANCE RATIOS

1 Capital Turnover Ratio
2 Fixed Assets Turnover Ratio
3 Working Capital Turnover Ratio
4 Finished Goods or Stock Turnover Ratio
5 WIP Trunover Ratio
6 Rawmaterial Turnover Ratio
7 Debtors Turnover Ratio
8 Creditors Turnover Ratio

E) PROFITABILITY RATIOS BASED ON SALES

1 Gross Profit Ratio
2 Operating Profit Ratio
3 Net Profit Ratio
4 Contribution Sales Ratio

F) PROFITABILITY RATIOS OWNER'S VIEW POINT

1 Return on Investment (ROI) or Return on Capital Employed (ROCE) ROCE > Int Rate
2 Return on Equity (ROE)
3 Earning Per Share (EPS)
4 Dividend Per Share (DPS)
5 Return on Assets (ROA)
A) LIQUIDITY RATIOS - SHORTTERM SOLVENCY

RATIO FORMULA NUMERATOR DENOMINATOR

1.Current Ratio Current Assets / Inventories Sundry Crs (for Goods)
Current Liabilities + Debtors + OS Expn ( for Service)
+ Cash & Bank + Bank OD / CC
+ Receivables + Provision for Tax
+ Short Term Loans + Proposed / Unclaimed Dividend
+ Marketable Investments

2. Quick Ratio or Quick Assets / Current Assets Current Liabilities

Acid test Ratio Quick Liabilities Less : Inventories Less : Bank OD / CC
Less : Prepaid Expenses

3. Absolute Cash Raio (Cash + Marketable Cash in Hand As above

Securities) / CL Cash at Bank
Maketable Securities
Short Term Investments

4. Interval Measure Quick Assets / Cash As above Annual Cash Expenses / 365
Expenses Per Day Cash Expenses = Total Expn - Depn -
W/off

B) CAPITAL STRUCTURE RATIOS / INDICATOR OF FINANCING TECHNIQUES & LONG TERM SOLVENCY

1. Equity to Total Shareholder's Funds / Equity Share Capital Total Long Term funds employed
Funds Ratio Total Funds + Preference Share Capital Debt + Equity
+ Reserves & Surplus
Less : Accumulated Losses

2. Debt Equity Ratio Debt / Equity Long Term Borrowed Funds Equity Share Capital
Debentures + Preference Share Capital
Long Term Loans + Reserves & Surplus
Less : Accumulated Losses

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3. Capital Gearing Fixed Charge Bearing Preference Share Capital Equity Share Capital
Ratio Capital / Equity + Debentures + Reserves & Surplus
Shareholder's Funds + Long Term Loans Less : Accumulated Losses

4. Fixed Asset to Fixed Assets / Long Term Net Fixed Assets Shareholder's Fund (Equity)
Long Term Fund Funds Gross Block Debt
Ratio Less : Cum Depreciation

5. Proprietary Ratio Proprietary Funds / Total Equity Share Capital Net Fixed Assets
Assets + Preference Share Capital + Total Current Assets
+ Reserves & Surplus (only Tangible assets will be included)
Less : Accumulated Losses

Note :
Liability Route (ESC + PSC + Reserves & Surplus Less Accumulated Losses)
Assets Route ( Net Fixed Assets + Net Working Capital Less Longterm Liability)

C) COVERAGE RATIOS - ABILITY TO SERVE FIXED LIABILITIES

1. Debt Service NP After Tax Interest

Coverage Ratio Earnings for Debt Service
Add : Tax Add : Instatment of Debt
/ (Interest + Instalment)
Add : Interest (Principal repaid)
Add : Non Cash Expn (Depn)
Add : Non Operating Adj
(loss on sale of FA)

2. Interest Coverage EBIT / Interest Sales Less Varial & Fixed Cost Interest
Ratio (Excluding Interest)
EAT + Tax + Interest

3. Preference EAT / Preference Earnings After Tax Dividend on Preference Share Capital
Dividend Coverage Dividend
Ratio

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D) TURNOVER / ACTIVITY / PERFORMANCE RATIOS

1. Capital Turnover Sales / Capital Employed Sales net of returns Net FA + Net WC (Asset Route)
Ratio ESC + PSC + Reserves & Surplus +
Debenture & LT Loans Less
Accumulated Losses Less Non Trade
Investments (Liability Route)

2. Fixed Asset Turnover / Fixed Assets Sales net of returns Net Fixed Assets
Turnover Ratio

3. Working Capital Turnover / Net Working Sales net of returns CA Less CL

Turnover Ratio Capital

4. Finished Goods or COGS / Average Opening Stock + Purchases - (Opening + Closing) / 2 or

Stock Turnover Ratio Stock Closing Stock (Max + Min Stock) / 2

5. WIP Turnover Factory Cost / Average Material + Wages (Open WIP + Close WIP) / 2
Ratio Stock of WIP + Production OHS

6. Raw Material COMC / Average Opening Stock of RM + (Opening + Closing) / 2

Turnover Ratio Stock of RM Purchases - Closing Stock

7. Debtors Turnover Credit Sales / Average Credit Sales net of returns Debtors + B/R
Ratio Accounts Receivable (Opening + Closing) / 2

8. Creditors Turnover Credit Purchases / Avg Credit Purchase net of returns Creditors + B/P
Ratio Accounts Payable (Opening + Closing) / 2

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E) PROFITABILITY RATIOS BASED ON SALES

1. Gross Profit Ratio Gross Profit / Sales Gross Profit Sales net of returns

2. Operating Profit Operating Profit / Sales Sales Less Cost of Sales (or) Sales net of returns
Ratio Net Profit
Add : Non Operating Expn
Less : Non Operating Income

3. Net Profit Ratio Net Profit / Sales Net Profit Sales net of returns

4. Contribution Sales Contribution / Sales Sales Less Variable Cost Sales net of returns
Ratio
F) PROFITABILITY RATIOS OWNER'S VIEW POINT

1.ROI or ROCE Total Earnings / Total Profit After Tax
Capital Employed Add : Tax
Add : Interest
Add : Non Trading Expn
Less : Non Operating incomes
(Rent, Interest & Dividend)
Net FA + Net WC (Asset Route)
ESC + PSC + Reserves & Surplus +
Debenture & LT Loans Less
Accumulated Losses Less Non Trade
Investments (Liability Route)

2. ROE EAT / Net Worth Profit After Tax Net Fixed Assets + Net WC
Less : External Liabilities (Long Term)

3. EPS (PAT - Preference Profit After Tax Equity Share Capital / Face Value per
Dividend) / No of Equity Less : Preference Dividend Share
Shares

4. DPS Dividends / No of Equity Profits distributed to Equity Equity Share Capital / Face Value per
Shares shareholders Share

5. ROA NP after Tax / Average Net Profit After Tax Avg Total Assets or Tangible or Fixed
Total Assets (Opening + Closing / 2)

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