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Ratio analysis

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  • 1. P a g e | 2 - Notes compiled by Prof. M.B. Thakoor TRADITIONAL CLASSIFICATION(1) BALANCE SHEET RATIOS (1) Current Ratio (2) Quick Ratio / Liquid Ratio / Acid Test Ratio. (3) Super Quick Ratio (4) Stock to work Capital Ratio (5) Capital Gearing Ratio (6) Debt Equity Ratio (7) Proprietary Ratio (8) Long Term Borrowing : Total Asset (9) Fixed Assets : Net Worth.(2) REVENUE STATEMENT RATIOS (1) Gross Profit Ratio (2) Net Profit Ratio (3) Operating Net Profit Ratio (4) Operating Ratio (5) Operating Expenses Ratio (6) Stock Turnover Ratio (7) Stock Holding Period(3) COMBINED RATIOS (1) Return on Investment (ROI) or Return on Capital Employed (ROCE) (2) Return on Proprietor / Shareholder fund (3) Return on Equity shareholder fund (4) Earning per share (5) Dividend per share (6) Dividend Payout Ratio (7) Price Earning Ratio (8) Interest Coverage Ratio (9) Debt : Service Coverage Ratio (10) Debit Collection period (11) Debtor Turnover Ratio (12) Creditor Payment Period (13) Creditor Turnover Ratio (14) Preference Dividend Cover (15) Equity Dividend Cover
  • 2. P a g e | 3 - Notes compiled by Prof. M.B. Thakoor BASED ON FUNCTIONS(1) SOLVENCY RATIOS (a) Short Term Solvency (1) Current Ratio (2) Quick Ratio / Liquid Ratio / Acid Test Ratio (3) Super Quick Ratio (4) Stock : Working Capital Ratio. (b) Long Term Solvency / Leverage Ratio / Capital Structure Ratio (1) Capital Gearing (2) Debt : Equity Ratio (3) Proprietary Ratio (4) Long Term Borrowing : Total Assets = 1 – Net Worth / Total Assets (5) Fixed Asset : Net worth(2) ACTIVITY RATIO / PRODUCTIVITY RATIO / TURNOVER RATIOS (1) Stock Turn Over Ratio (2) Stock Holding Period (3) Debt Collection Period (4) Debtor Turnover Ratio (5) Creditor Payment Period (6) Creditor Turnover Ratio.(3) PROFITABILITY RATIO (a) In relation to sales (1) Gross Profit Ratio (2) Net Profit Ratio (3) Operating Net Profit Ratio (4) Operating Ratio (5) Operating Expenses Ratio. (b) In relation to capital employed (1) Return on Interest (ROI) or Return on Capital Employed (ROLE) (2) Return on Proprietor / Shareholder funds (3) Return on Equity Shareholder Fund (4) Earning per Share (5) Dividend per Share (6) Dividend Payout Ratio (7) Price Earning Ratio(4) COVERAGE RATIOS (1) Interest Coverage Ratio (2) Preference Dividend Cover (3) Equity Dividend Cover (4) Debt Service Coverage Ratio
  • 3. P a g e | 4 - Notes compiled by Prof. M.B. Thakoor USER BASED CLASSIFICATION(1) FOR SHORT TERM CREDITORS (1) Current Ratio (2) Quick / Liquid Ratio / Acid Test Ratio (3) Super Quick Ratio (4) Stock : Working Capital Ratio (5) Stock Turnover Ratio (6) Stock Holding Period (7) Creditor Payment Period (8) Creditor Turnover Ratio(2) FOR LONG TERM CREDITORS (1) Capital Gearing Ratio (2) Debit : Equity Ratio (3) Proprietary Ratio (4) Long Term Borrowing : Total Asset Ratio (5) Fixed Asset : Net worth (6) Interest Coverage Ratio (7) Debt Service Coverage Ratio(3) FOR SHARE HOLDERS (1) Return on Investment (ROI) or Return on Capital Employed (ROCE) (2) Return on Proprietary / Shareholder fund (3) Return on Equity Shareholder fund (4) Earning per share (5) Dividend per share (6) Dividend payout Ratio (7) Price Earning Ratio (8) Preference Dividend Cover (9) Equity Dividend Cover(4) FOR MANAGEMENT (1) Return on Investment (ROI) or Return on Capital Employed (ROCE) (2) Debtor Turnover Ratio (3) Debtor Collection Period (4) Creditor Payment period (5) Creditor Turnover Ratio (6) Stock Turnover Ratio (7) Stock Holding Period (8) Gross Profit Ratio (9) Net Profit Ratio (10) Operating Net Profit Ratio (11) Operating Ratio (12) Proprietary Ratio (13) Fixed Asset : Net Worth (14) Long Term Borrowing : Total Assets