Ratio AnalysisRelationship between items or groups of items in the financial statement.-What is financial statement?

Income statementBalance sheet-expressed in terms of another figure-mathematical yardstick- measures the relation ship between two figures I B a l a n c e S h e e t R a t i o s : 1. Current Ratio= Current Assets / Current Liabilities Std 2:1 2. Liquid Ratio = Quick Assets / Quick Liabilities Std 1:1 3. Proprietary Ratio= Proprietors Fund* / Total Assets Std Neither betoo high or too low*Equity + R.S + Pref+ Surplus - Miscellaneous 4.Stock working capital Ratio:= stock / Working capital Std 1:1Higher ratio indicates weak working capital 5. Capital Gearing Ratio = Fixed income bearing securities /Non fixed income bearing securities High geared = fixed interest bearing securities are greater than equityshareholders fund Low geared = just opposite to the above Std 1:4 6. Debt Equity Ratio = Long term debts / Shareholders Funds Std 2:1 7. Fixed Assets Ratio = Fixed Assets / Long term funds II. Revenue Statement Ratios: 8.Gross Profit Ratio = Gross Profit / Net Sales 1009.Operating Ratio = Operating Cost / Net Sales 100Manufacturing Concern highOther firms -low10.Expenses Ratio = Concerned Expense / Net Sales 10011.Net Profit Ratio = Net profit / Net Sales 10012.Net Operating Profit Ratio = Operating Profit / Net Sales 100Operating profit = GP- all expenses including finance13.Stock Turnover Ratio = Cost of Goods Sold/ Average Stock Std.: Seasonable based on nature of production

III Combined/ Composite Ratios: 14. Return on Capital Employed = NPBIT / Capital Employed 100-indicate the management efficiency- p r o d u c t i v i t y o f c a p i t a l u t i l i z e d o v e r a l l e f f i c i e n c y . 15. Return on Proprietors Funds = NPAT / Proprietors Funds 10016.Return on Equity Share capital = NPAT-Pref.Dividend / Equity share capital17.Earnings per share = NPAT- Pref. Dividend / No of Equity Shares18.Dividend / Payout Ratio = Divi. Per Equity share / EPS19.Divi. Yield Ratio = Divi. Per share / Mkt price per share20.Price Earning Ratio = Mkt. Price Per Share / EPS21.Debt Service Ratio = NPBIT / Interest( Interest coverage Ratio)22.Creditors Turnover Ratio = Credit Purchase /Average Accounts PayableC.P.Period = days/ months in a year / CTR 23.Debtors Turnover Ratio = Credit Sales / Average Accounts ReceivableD.C.Period = days/ months in a year / DTR 24.Fixed Assets Turnover Ratio = Sales / Fixed Assets25.Total Assets Turnover Ratio = Sales / Total Assets26.Working Capital Turnover Ratio = Sales / Working Capital27.Capital Turnover Ratio = Sales/ Capital employed.