Some important formulas related to ratio analysis

1. Prof. Dr. Suhas Telang
Ratio Analysis

2. GROSS PROFIT RATIO
1. Gross Profit
Gross Profit Ratio = -------------------- x 100
Net Sales
2. Gross Profit = Sales – Cost of goods sold
3. Gross Profit = Net Profit + Operating Expenses
4. Net Sales = Total Sales – Sales Returns

3. Net Profit Ratio
Net Profit
Net Profit Ratio = ---------------- x 100
Net Sales
Net Profit = Gross Profit – Operating And Non
Operating Expenses + Non Operating Income
Operating Expenses = Office & Administrative Exp. + Selling
& Distribution Expenses + Financial
Expenses
Non Operating Expenses = Expenses not related with
production
Non Operating Income = Income not related with production

4. Operating Net Profit
Operating Net Profit Ratio = ---------------------------- X 100
Net Sales
Operating Net Profit = Net Profit + Non Operating Expenses –
Non Operating Income
Operating Net Profit = Gross Profit - Operating Expenses
OPERATING NET PROFIT RATIO

5. Operating Ratio
Cost Of Goods Sold + Operating Expenses
Operating Ratio = ------------------------------------------------------X 100
Net Sales
Operating Cost
Operating Ratio = ---------------------- X 100
Net Sales

6. Cost of Goods Sold
1. Cost of Goods Sold = Sales – Gross Profit
2. Cost of Goods Sold = Opening Stock + Purchases +
Direct Wages + Direct Expenses
– Closing Stock

7. Cost of Goods Sold
Stock Turnover Ratio = -------------------------------
Average Stock
Opening Stock + Closing Stock
Average Stock = -----------------------------------------------
2
Particulars Expenses
Expenses Ratio = -------------------------------X 100
Net Sales

8. Current Assets
Current Ratio = ----------------------------
Current Liabilities
Current Assets = Cash in Hand + Cash at Bank +
Debtors + Bills Receivable +
Closing Stock + Outstanding
Income + Prepaid Expenses +
Marketable Assets + Other Short
Term Assets

9. Current Liabilities = Bank Overdraft + Creditors +
Bills Payable + Bad Debt
Reserve + Provision for Tax
and Dividend + Closing Stock
+ Outstanding Expenses +
Income Received in Advance
+ Other Short Term Liabilities

10. Acid Test Or Quick Ratio Or Liquidity
Ratio
•
Acid Test or Quick Ratio or Liquidity Ratio =
Liquid or Quick Assets
--------------------------------------
Liquid or Quick Liabilities
• Liquid or Quick Assets = Current Assets – Stock – Prepaid
Expenses
• Liquid or Quick Liabilities = Current Liabilities – Bank
Overdraft

11. DEBT EQUITY RATIO
1. Debt
Debt equity ratio = -----------
Equity
_______________________________________________
2. Outsiders Fund Debt
equity ratio = ------------------------------
Shareholder’s Fund

12. Debt's = Long term loans + Debentures or Bonds + Short term
Liabilities
• Equety = Equity Share Capital+ Preferance Share Capital +
• Profit & Loss A/c + Reserve + Fund

13. Net Credit Sales
1. Debtor’s Turnover Ratio = ----------------------------------
Average or Closing Debtors
Debtors = Sundry Debtors + Bills Receivable
Net Credit Purchase
2. Creditor’s Turnover Ratio = --------------------------------
Average or Closing Creditors
Creditor’s = Sundry Creditors + Bills Payable

14. ASSET TRUNOVER RATIO =
Net Sales/Tangible Assets
FIXED ASSET TURNOVER RATIO =
Net Sales /Fixed Assets
CURRENT ASSET TURNOVER RATIO =
Net Sales / Current Assets
RETRUN ON ASSETS =
Net Profit after Taxes/Total Assets

15. Net Profit After Taxes + Preference Dividend
Earning Per Share = -----------------------------------------------
No. of Equity Shares
Net Sales
Fixed Assets Turnover Ratio = --------------------------------
Net Fixed Assets
Cost of Goods Sold
Fixed Assets Turnover Ratio = --------------------------------
Net Fixed Assets