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SUBMITTED BY
ANKIT KOCHAR
SUBMITTED TO
CA. SONAM RAI
 RELATIONSHIP EXPRESSED
IN MATHEMATICAL
TERMS IN FIGURES WHICH
ARE CONNECTED IN SOME
MANNER
ACCOUNTING
RATIOS
TRADITIONAL
P&L A/C
RATIOS
BALANCE
SHEET RATIOS
COMPOSITE
RATIO
FUNCTIONAL
COVERAGE
RATIO
PROFITABILITY
RATIOS
FINANACIAL
RATIO
LIQUIDITY
RATIO
STABILITY
RATIOS
TURNOVER
RATIO
 GROSS PROFITABILITY RATIO= GROSS
PROFIT /(SALES- SALES RETURN)
 NET PROFIT= NET PROFIT/ (SALES- SALES
RETURN)
 RETURN ON CAPITAL EMPLOYED=NET
OPERATING PROFIT BEFORE INTEREST
AND TAX/ TOTAL CAPITAL EMPLOYED
 RETURN ON SHARE HOLDERS FUND=
(NET PROFIT AFTER INTEREST AND TAX/
SHAREHOLDERS’ FUND) * 100
 RETURN ON EQUITY SHARE HOLDERS
FUND= (NET PROFIT AFTER INTEREST,
TAX , AND PREFERENCE
DIVIDEND/EQUITY SHARE HOLDERS
FUND)*100
 RETURN ON TOTAL ASSETS= (NET PROFIT
AFTER TAX/TOTAL ASSETS)*100
 EARNING PER SHARE= NET PROFIT AFTER
TAX AND PREFERENCE DIVIDEND/
NUMBER OF EQUITY SHARES
 STOCK TURN OVER RATIO= (COST OF
GOODS SOLD DURING THE
YEAR/AVERAGE INVENTORY)
 LIQUIDITY RATIOS- TERMED AS WORKING
CAPITAL RATIO. IT DEFINES THE
WORKING CAPITAL REQUIRED TO RUN
DAY TO DAY OPERATIONS
 STABILITY- HELPS IN DETERMINING THE
LONG TERM SOLVENCY OF A FIRM .
 CURRENT RATIOS= CURRENT ASSET/
CURRENT LIABILITY
 QUICK RATIO= (CURRENT ASSETS –
INVENTORY)/CURRENT LIABILITY
 SUPER QUICK RATIO=(CASH AND
MARKETABLE SECURITIES)/CURRENT
LIABILITY
 FIXED ASSET RATIO=FIXED ASSET/ LONG
TERM FUNDS
 CAPITAL GEARING RATIO= FUNDS
BEARING FIXED INTEREST OR FIXED
DIVIDENDS/ TOTAL CAPITAL EMPLOYED
 DEBT- EQUITY RATIO=TOTAL LONG TERM
DEBT / SHARE HOLDERS’ FUND
 PROPRIETARY RATIO=SHARE HOLDERS’
FUND/ TOTAL TANGIBLE ASSETS
 SIMPLIFIES FINANCIAL STATEMENTS
 FACILITATES INTER- FIRM COMPARISON
 MAKES INTRA – FIRM COMPARISON
POSSIBLE
 HELPS IN PLANNING
 COMPERATIVE STUDY REQUIRED
 LIMITATIONS OF FINANCIAL
STATEMENTS
 RATIOS ALONE ARE NOT ADEQUATE
 WINDOW DRESSING
 PROBLEMS OF PRICE LEVEL CHANGES
 NO FIXED STANDARDS
 COMPOSITE OF MANY FIGURES

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Presentations on ratios

  • 2.  RELATIONSHIP EXPRESSED IN MATHEMATICAL TERMS IN FIGURES WHICH ARE CONNECTED IN SOME MANNER
  • 4.  GROSS PROFITABILITY RATIO= GROSS PROFIT /(SALES- SALES RETURN)  NET PROFIT= NET PROFIT/ (SALES- SALES RETURN)  RETURN ON CAPITAL EMPLOYED=NET OPERATING PROFIT BEFORE INTEREST AND TAX/ TOTAL CAPITAL EMPLOYED  RETURN ON SHARE HOLDERS FUND= (NET PROFIT AFTER INTEREST AND TAX/ SHAREHOLDERS’ FUND) * 100
  • 5.  RETURN ON EQUITY SHARE HOLDERS FUND= (NET PROFIT AFTER INTEREST, TAX , AND PREFERENCE DIVIDEND/EQUITY SHARE HOLDERS FUND)*100  RETURN ON TOTAL ASSETS= (NET PROFIT AFTER TAX/TOTAL ASSETS)*100  EARNING PER SHARE= NET PROFIT AFTER TAX AND PREFERENCE DIVIDEND/ NUMBER OF EQUITY SHARES
  • 6.  STOCK TURN OVER RATIO= (COST OF GOODS SOLD DURING THE YEAR/AVERAGE INVENTORY)
  • 7.  LIQUIDITY RATIOS- TERMED AS WORKING CAPITAL RATIO. IT DEFINES THE WORKING CAPITAL REQUIRED TO RUN DAY TO DAY OPERATIONS  STABILITY- HELPS IN DETERMINING THE LONG TERM SOLVENCY OF A FIRM .
  • 8.  CURRENT RATIOS= CURRENT ASSET/ CURRENT LIABILITY  QUICK RATIO= (CURRENT ASSETS – INVENTORY)/CURRENT LIABILITY  SUPER QUICK RATIO=(CASH AND MARKETABLE SECURITIES)/CURRENT LIABILITY
  • 9.  FIXED ASSET RATIO=FIXED ASSET/ LONG TERM FUNDS  CAPITAL GEARING RATIO= FUNDS BEARING FIXED INTEREST OR FIXED DIVIDENDS/ TOTAL CAPITAL EMPLOYED  DEBT- EQUITY RATIO=TOTAL LONG TERM DEBT / SHARE HOLDERS’ FUND  PROPRIETARY RATIO=SHARE HOLDERS’ FUND/ TOTAL TANGIBLE ASSETS
  • 10.  SIMPLIFIES FINANCIAL STATEMENTS  FACILITATES INTER- FIRM COMPARISON  MAKES INTRA – FIRM COMPARISON POSSIBLE  HELPS IN PLANNING
  • 11.  COMPERATIVE STUDY REQUIRED  LIMITATIONS OF FINANCIAL STATEMENTS  RATIOS ALONE ARE NOT ADEQUATE  WINDOW DRESSING  PROBLEMS OF PRICE LEVEL CHANGES  NO FIXED STANDARDS  COMPOSITE OF MANY FIGURES