Ratio Analysis

    -Relationship between items or groups of items in the financial statement.
    -What is financial statement?
     Income statement
     Balance sheet
   
-expressed in terms of another figure
-mathematical yardstick- measures the relation ship between two figures

I    Balance Sheet Ratios:
    1. Current Ratio    = Current Assets / Current Liabilities  Std 2:1  
    2. Liquid Ratio     = Quick Assets / Quick Liabilities      Std 1:1
    3. Proprietary Ratio    =  Proprietor’s Fund* / Total Assets  Std  Neither be  
                         too high or too low
*Equity + R.S + Pref+ Surplus - Miscellaneous   

        4.Stock working capital Ratio:= stock / Working capital     Std 1:1
Higher ratio indicates weak working capital
    5. Capital Gearing Ratio = Fixed income bearing securities /Non fixed income                        bearing securities
High geared = fixed interest bearing securities are greater than equity
shareholders fund
Low geared = just opposite to the above  Std 1:4
6. Debt Equity Ratio = Long term debts / Shareholders Funds  Std 2:1

7. Fixed Assets Ratio = Fixed Assets / Long term funds   
II. Revenue Statement Ratios:
       
        8.Gross Profit Ratio = Gross Profit / Net Sales 100
       
        9.Operating Ratio = Operating Cost / Net Sales 100
                         Manufacturing Concern – high
                         Other firms’  -low
        10.Expenses Ratio = Concerned Expense / Net Sales 100   
       
        11.Net Profit Ratio = Net profit / Net Sales 100

        12.Net Operating Profit Ratio = Operating Profit / Net Sales 100
           
Operating profit = GP- all expenses including finance
       
13.Stock Turnover Ratio = Cost of Goods Sold/ Average Stock

Std.: Seasonable based on nature of production


III Combined/ Composite Ratios:

14. Return on Capital Employed = NPBIT / Capital Employed 100
            -indicate the management efficiency
-    productivity of capital utilized
-    overall efficiency.

15. Return on Proprietors Funds = NPAT / Proprietors Funds 100

16.Return on Equity Share capital = NPAT-Pref.Dividend / Equity share capital

17.Earnings per share = NPAT- Pref. Dividend / No of Equity Shares

18.Dividend / Payout Ratio = Divi. Per Equity share / EPS

19.Divi. Yield Ratio = Divi. Per share / Mkt price per share

20.Price –Earning Ratio = Mkt. Price Per Share / EPS

21.Debt Service Ratio = NPBIT / Interest
    ( Interest coverage Ratio)

22.Creditors Turnover Ratio = Credit Purchase /Average Accounts Payable  
    C.P.Period = days/ months in a year / CTR
23.Debtors Turnover Ratio = Credit Sales / Average Accounts Receivable
    D.C.Period = days/ months in a year / DTR

24.Fixed Assets Turnover Ratio = Sales / Fixed Assets

25.Total Assets Turnover Ratio = Sales / Total Assets

26.Working Capital Turnover Ratio = Sales / Working Capital

27.Capital Turnover Ratio = Sales/ Capital employed.