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Ratio Analysis
Ratio Analysis
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Ratio Analysis

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Financial ratios

Financial ratios

Published in: Economy & Finance, Business
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  • 1. NATURE OF ACCOUNTS ASSETS CURRENT ASSETS QUICK ASSETS / LIQUID ASSETS Cash, Bank, Account Receivable, Notes Receivable, Marketable Securities & Accrued interest on notes receivable OR (TOTAL CURRENT ASSETS - INVENTORY) OTHER CURRENT ASSETS Merchandise Inventory, Bills Receivable, Short Term Investment, Accrued Income, Supplies, Prepaid Expenses etc. NON CURRENT ASSETS Furniture, Building, Machinery, Equipment, Land, Long Term Investment & Motor Vehicle, etc LIABILITIES CURRENT LIABILITIES Accounts Payable, Notes Payable, Bills Payable, Bank Overdraft, Advance from customer, Short Term Loan, Accrued Expenses, Unearned Income, Outstanding, Dividend Declared, Accrued interest on notes payable, etc. NON CURRENT LIABILITIES Long Term Loan, Bonds Payable, Debenture Payable, Mortgage Payable. SHARE HOLDER’S / STOCK HOLDER’S EQUITY Share Capital, Share Premium, Retained Earning, General Reserve, & any Other Reserve. OR (TOTAL ASSETS – TOTAL LIABILITIES) RATIO ANALYSIS 1. WORKING CAPITAL Working Capital = Current Assets – Current Liabilities 2. CURRENT RATIO Current Assets Current Ratio = = Ans : 1 Current liabilities 3. CASH RATIO Cash Cash Ratio = = Ans : 1 Current liabilities 4. ACID-TEST RATIO / QUICK RATIO / LIQUID RATIO Quick Assets Quick Ratio = = Ans : 1 Current liabilities 5. (a) INVENTORY TURNOVER / MERCHANDISE TURNOVER (a) Inventory Turnover = Cost of Goods Sold = Times Average Inventory (b) INVENTORY TURNOVER DAYS / DAYS SUPPLY IN INVENTORY 365 (b) Inventory Turnover Days = = Days Times 6. (a) ACCOUNTS RECEIVABLE TURNOVER Net Credit Sales (a) Receivable Turnover = = Times Average Accounts Receivable (b) ACCOUNTS RECEIVABLE TURNOVER DAYS 365 (b) Receivable Turnover Days = = Days Times 7. (a) ACCOUNTS PAYABLE PAYMENT PERIOD (a) Payable Payment = Net Credit Purchases = Times Average Accounts Paybale (b) PAYABLE PAYMENT DAYS 365 (b) Payable Payment Days = = Days Times 8. TOTAL DAYS / AVERAGE DAYS OF OPERATING CYCLE Total Days of Operating Cycle = Accounts Receivable Turnover days + Inventory Turnover Days 1
  • 2. 9. DEBT RATIO Debt Ratio = Total liabilities X 100 = Ans % Total Assets 10. EQUITY RATIO Total Shareholder' s Equity Equity Ratio = X 100 = Ans % Total Assets 11. ASSETS TURNOVER Assets Turnover = Total Net Sales X 100 = Ans % Total Assets 12. EARNING PER SHARE Earning per Share = Net Income = Ans No. of Shares 13. PRICE EARNING RATIO Market Price = Ans Price Earning Ratio = Earning per Share 14. DIVIDEND PER SHARE Dividends = Ans Dividend per Share = No. of Shares 15. DIVIDEND YIELD Dividend per Share Dividend Yield = = Ans Market Price 16. BOOK VALUE PER SHARE Total Shareholder' s Equity Book Value per Share = = Ans No. of Shares 17. RATE OF RETURN ON TOTAL ASSETS Return on Total Assets = Net Income X 100 = Ans % Total Assets 18. RATE OF RETURN ON SHAREHOLDER’S EQUITY Net Income Return on Shareholder' s equity = X 100 = Ans % Total Shareholder' s Equity 19. RATE OF COST OF GOODS SOLD Rete of Cost of Goods Sold = Cost of Goods Sold X 100 = Ans % Total Net Sales 20. RATE OF GROSS PROFIT Gross Profit X 100 = Ans % Rete of Gross Profit = Total Net Sales 21. RATE OF OPERATING EXPENSES Operating Expenses Rete of Operating Expenses = X 100 = Ans % Total Net Sales 22. RATE OF NET PROFIT Net Profit Rete of Net Profit = X 100 = Ans % Total Net Sales 23. CASH FLOW MARGIN Cash from Operation Cash Flow Margin = X 100 = Ans % Total Net Sales 2

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