Ratio Analysis, formulas

1. Subject:-
Financial Statement Analysis

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Topic:-

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A ratio analysis is a quantitative analysis of information
contained in a company's financial statements. Ratio analysis
is used to evaluate various aspects of a company's operating
and financial performance such as its efficiency, liquidity,
profitability and solvency.
Ratio:-

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Current ratio:-
Current ratio analysis the short term
financial position of a firm and andicate the ability
of the firm to meet it's short term commitments out
of it's resources

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Operating ratio:-
The operating ratio is compute to establish
relationship between operating cost and net sales
Formula:-
Net profit ratio:-
For the purpose of this ratio, net
profit is equal to gross profit minus operating
expenses and income tax. All non-operating revenues
and expenses are not taken into account because the
purpose of this ratio is to evaluate
the profitability of the business from its primary
operations.

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Net profit ratio:-

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Formula:-
The Expense Ratio:-
The expense ratio of a stock or asset fund
is the total percentage of fund assets used for administrative,
management, advertising (12b-1), and all other expenses. An
expense ratio of 1% per annum means that each year 1% of the
fund's total assets will be used to cover expenses
Formula:-

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Operating cost ratio:-
The operating expense
ratio (OER) is a measure of what
it costs to operate a piece of property compared to
the income that the property brings in. It is calculated
by dividing a property's operating expense by its
gross operating income and used for comparing
the expenses of similar properties.
Formula:-

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Net worth is the
amount by which assets exceed liabilities. ... A
consistent increase in net worth indicates good
financial health; conversely, net worth may be
depleted by annual operating losses or a substantial
decrease in asset values relative to liabilities.
Net profit to net worth ratio:-
Formula:-
Net profit to net worth ratio = net profit after tax & interest / net
worth *100

10. Gross profit ratio:-
Gross profit ratio (GP ratio) is a profitability
ratio that shows the relationship between gross profit and total net sales
revenue. It is a popular tool to evaluate the operational performance of the
business . The ratio is computed by dividing the gross profit figure by net
sales.
Formula GP:-
gross profit / net sales * 100
10

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Quick Ratio:-
Quick ratio is an indicator of a
company’s short-term liquidity position, and
measures a company’s ability to meet its short-term
obligations with its most liquid assets. Since it
indicates the company’s financial position to
instantly use its near cash assets (that is, liquid
assets) to get rid of its current liabilities, it is also
called as the acid test ratio.
Formula:-

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Return on investment, or
ROI, is the ratio of a profit or loss made in a fiscal
year expressed in terms of an investment and shown
as a percentage of increase or decrease in the value of
the investment during the year
Return on investment:-

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Earning per share:-
Net income divided by the number of shares the
company has outstanding.
Formula:-
Dividend per share:-
A dividend is a distribution to shareholders out of
profit or reserve available for this purpose.

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The working capital turnover ratio
is also referred to as net sales to working capital. It
indicates a company's effectiveness in using its working
capital. The working capital turnover ratio is calculated as
follows: net annual sales divided by the average amount of
working capital during the same 12 month period.
Formula:-
capital turnover ratio = cgs / capital employed
Capital turnover ratio:-

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Working capital turnover:-
Working capital turnover is a ratio which
measures how efficiently a company is using its working capital to support
a given level of sales. Also referred to as net sales to working capital, it
shows the relationship between the funds used to finance a company's
operations and the revenues a company generates as a result. A high
turnover ratio indicates that management is being extremely efficient in
using a firm's short-term assets and liabilities to support sales.
Formula:-
Net sales / net working capital

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Inventory turnover:-
Inventory turnover is a ratio showing how many times a company has
sold and replaced inventory during a period. The company can then
divide the days in the period by the inventory turnover formula to
calculate the days it takes to sell the inventory on hand. It is calculated
as sales divided by average inventory.
Formula:-
Cgs / average inventory
Average inventory is used in the ratio because companies might have
higher or lower inventory levels at certain times in the year
Cost of goods sold (cogs):- is a measurement of the production
costs of goods and services for a company. COGS can include the cost
of materials, labor costs directly related to goods produced, and any
factory overhead or fixed costs that are directly used in the production
of goods.

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Receivable turnover:-
Is the number of times per year that A business collects its
average accounts receivable. The ratio is intended to evaluate the ability of A company
to efficiently issue credit to its customers and collect funds from them in A timely
manner.
Formula:-
Annual credit sale / average account receivable
Uses of 'receivables turnover ratio:-
The receivables turnover ratio has several
important functions other than simply assessing whether or not A company has issues
collecting on credit. Though this offers important insight, it does not tell the whole
story. For example, if one were to track A company’s receivables turnover ratio over
time, it would say much more about the company’s history with issuing and collecting
on credit than A single value can. By looking at the progression, one can determine if
the company’s receivables turnover ratio is trending in A certain direction or if there
are certain recurring patterns. What is more, by tracking this ratio over time alongside
earnings, one may be able to determine whether A company’s credit practices are
helping or hurting the company’s bottom line.

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Creditor turnover ratio:-
Creditor turnover ratio the accounts payable
turnover ratio is a short-term liquidity measure used to
quantify the rate at which a company pays off its suppliers
same period
Formula:-

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Debt to net worth ratio:-
A firm's net worth can be calculated by subtracting its total
assets by its total long-term and short-term debt. If the business has more assets
than its liabilities, its net worth will be positive. And vice versa, if the
business liabilities exceed its total assets, it will have a negative net worth.
Formula:-

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Assets turnover ratio:-
Fixed-asset turnover is the ratio of sales (on the
profit and loss account) to the value of fixed assets(on the balance sheet). It
indicates how well the business is using its fixed assets to generate sales.
Formula:-

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Net fixed assets:-
His ratio divides net sales by net fixed
assets, over an annual period. The net fixed assets include
the amount of property, plant, and equipment, less the
accumulated depreciation. Generally, a higher fixed asset
ratio implies more effective utilization of investments
in fixed assets to generate revenue
Formula:-
Fixed assets
---------------------------
long term funds

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Any Question?