The document discusses various types of financial ratios used in ratio analysis. It describes solvency ratios like current ratio and liquid ratio that measure a company's ability to meet short-term obligations. Capital structure ratios like debt-equity ratio measure financial leverage. Turnover/efficiency ratios like inventory turnover ratio measure how efficiently a company uses its resources. The document provides formulas and explanations for calculating these key financial ratios.

1. Ratio Analysis

2. RATIOS
PROFITABILITY
RATIOS
CAPITAL TURNOVER IN RELATION TO
SOLVENCY
STRUCTURE (EFFICIENCY) SALES OTHER RATIOS
RATIOS
RATIOS RATIOS
IN RELATION TO
CAPITAL EMPLOYED

3. SOLVENCY RATIOS
 CURRENT RATIO=
CURRENT ASSETS
CURRENT LIABILITIES

4.  LIQUID RATIO/ QUICK/ ASID TEST RATIO
=QUICK ASSETS
QUICK LIABILITIES
QUICK ASSESTS= CURRENT ASSETS- (STOCK+PREPAID)
QUICK LIABILITIES= CURRENT LIABILITIES- BANK OD

5.  PROPRIETORY RATIO=
PROPRIETOR’S FUNDS 100
*
TOTAL ASSETS

6. CAPITAL STRUCTURE RATIOS
 DEBT-EQUITY RATIO= DEBT / EQUITY
 OR
 DEBT / DEBT+EQUITY


7. CAPITAL WITH FIXED RATE OF RETURN = preference shares + debentures +
term loans
CAPITAL NOT WITH FIXED RATE OF RETURN = equity shares + reserves and
surplus
Indicates the long debts borrowings as a proportion to owned funds
When the ratio is more than 1 the capital is said to be highly geared
It reflects trading on equity (means more is the equity more is the chance of raising
finance by way of preference shares/ debentures/ long term loans)

8. TURNOVER/EFFICIENCY
RATIO
 INVENTORY TURNOVER RATIO=
COST OF GOODS SOLD
AVERAGE STOCK

9.  INVENTORY VELOCITY=
3. 365days/12months/52weeks
inventory turnover ratio