(1) Gross Profit Ratio

Gross Profit X 100

Net Sales

Gross Profit

Net Sales Cost of Goods Sold

Net Sales

Total Sales Sales Return

Total Sales

Cash Sales + Credit Sales

Cost

of

Goods

Sold

Opening

Expenses

Stock

Purchases

Direct

Purchase Return Closing Stock

(2) Net Profit Ratio

Net Profit X 100

Net Sales

Net Profit

Gross Profit Operating Expenses + Non-Operating Incomes Non

Operating Expenses

Operating Expenses

(SODA) Selling Expenses + Office Expenses

+ Distribution Expenses + Administrative Expenses

(3) Operating Profit Ratio

Operating Profit X 100

Net Sales

Operating Profit

Gross Profit Operating Expenses

Operating Profit

Net Profit + Non Operating Expenses Non Operating Income

(4) Operating Ratio

Operating Cost X 100

OR

Net Sales
Operating Cost

Cost of Goods Sold + Operating Expenses

(6) Return on Investment (ROI)

Profit before Interest, Tax & Dividend X 100

Capital Employed

Where, Profit before interest, Tax & Dividend = Profit After Tax + Interest + Tax
= Profit after Interest + Interest
Capital Employed

Share Capital (Equity + Preference)

+ Reserves + Surplus/Profit & Loss A/c (Cr.)/Accumulated Profits

+ Debentures + Long term loans [Preliminary Expenses


&

Discount/Commission

or

Issue

of

Share

Debenture

Profit

Loss A/c (Dr. Balance)]

ALTERNATIVELY
Capital

Employed

Net

Working

Fixed

Assets

Long

Term

Investments

Capital

Net Fixed Assets

Total Fixed Assets Depreciation

Working Capital

Current Assets Current Liabilities

(7) (a)
Return on Shareholder's Funds

Profit after Interest & Tax but before Dividend X 100

Equity or Shareholder's Funds

Equity or Shareholders' Fund

Share Capital (Equity + Preference) + Reserve

+ Surplus / Profit & Loss A/c (Cr. Balance) or accumulated profits

Share

Preliminary
Debentures

Accumulated

Expenses

Profit

Discount/Commission
&

Loss

A/c

(Dr.

on

Issue

Balance)

of
or

Losses

Profit after Interest, Tax but before Preference Dividend

= Profit after Tax Preference Dividend
= Profit after Interest Tax Preference Dividend
= Profit before Interest Interest Tax Preference Dividend

(7) (b) Return on Equity (ROE)

= Profit after interest, Tax & Pref. Dividend X 100
Equity Shareholder's Funds
Equity shareholder's Fund

(Cr.

Balance) or accumulated profits Preliminary Expenses Discount

/
(Dr.

Equity Share Capital + Reserve + Surplus / Profit & Loss A/c

commission

on

issue

of

Share

Debentures

Profit

Balance) or Accumulated Losses

(8) Interest coverage (Debt Service) Ratio =

Profit before Interest, Tax & Dividend

Interest on Debentures & Loans

(9) Current Ratio

Current Assets

Current Liabilities

&

Loss

A/c

Current Assets

Cash in Hand + Cash at Bank + Bills Receivable

+

term

Debtors

Marketable

Securities

or

Short

investments + Loans & Advances + Stock / Inventories

Current

Sundry

Prepaid Expenses + Accrued Incomes

Liabilities

Sundry

Bad

Debts

Outstanding

Creditors

Provision
Expenses

for
+

Bills

Payable

Taxation
Income

Provision

Bank

received

in

Short term Loans

(10) Liquid Ratio / Quick Ratio / Acid Test Ratio

=

Liquid Assets or Quick Assets

Current Liabilities

Liquid Assets = Current Assets Closing Stock Prepaid Expenses

(11) Stock Turnover Ratio (STR)

Cost of Goods Sold

Average Stock
Average Stock = (Opening Stock + Closing Stock)
(12) Debtors Turnover Ratio (DTR)

Net Credit Sales in a year

Average Accounts Receivable

Average A/c Receivable = (Opening A/c Receivable + Closing A/c Receivable)
Accounts Receivable = Debtors + B/R
OR
Account Receivable = Opening Debtor + Opening B/R + Closing Debtors + Closing B/R
2
(13) Average Debt Collection Period

Days or Months in a year

Debtors Turnover Ratio

Alternatively, Average Debt Collection Period
= Days or Months in a year X Accounts Receivable in a year
Net Credit Sales in a year
(14) Creditors Turnover Ratio (CTR)

Net Credit Purchases

Average Accounts Payable

for

Overdraft
Advance

Average A/c Payable = (Opening A/c Payable + closing A/c Payable)

Accounts Payable

= Creditors + B/P

(15) Average Payment Period

Days or Months in a year

Creditors Turnover Ratio

Alternatively, Average Payment Period

= Days or Months in a year X Accounts Payable in a year

Net Credit Purchases in a year

(16) Capital Turnover Ratio

Net Sales

Capital Employed
(17) Fixed Assets Turnover Ratio

Net Sales

Net Fixed Assets

Net Fixed Assets = Gross Fixed Assets - Depreciation
(18) Working Capital Turnover Ratio

Net Sales

Working Capital
Working Capital = current Assets Current Liabilities

(19) Assets Turnover Ratio

Net Sales
Total Assets

Total Assets = Fixed Assets + Long Term Investment Current Assets

(20) Debt-Equity Ratio

Long term Debt or Loans

Equity or Shareholders' Funds

Long term Debts

OR Long Term Debts

(21) Debt Total Fund Ratio

Debentures + Loans or Mortgage

Total Debts Current Liabilities
Long Term Debts

Total Long Term Funds

Total Funds Term Fund = shareholder's Funds + Long Term Debts
(22) Proprietary Ratio

Shareholder's Funds or Proprietor's Fund

Total Assets

Shareholder's Funds

Share Capital (Equity + Preference)

+ Reserves + Surplus/Accumulated Profit or P/L

A/c(Cr)

- Preliminary Expenses
Discount on issue of Shares/Debentures
P/L A/c (Dr.)

SUMMARY
Liquidity Ratios
S. No.

RATIOS

FORMULAS

Current Ratio

Current Assets/Current Liabilities

Quick Ratio

Liquid Assets/Current Liabilities

Absolute Liquid Ratio

Absolute Liquid Assets/Current Liabilities

Profitability Ratios
S.
No.

RATIOS

FORMULAS

Gross Profit Ratio

Gross Profit/Net Sales X 100

Operating Cost Ratio

Operating Cost/Net Sales X 100

Operating Profit ratio

Operating Profit/Net Sales X 100

Net Profit Ratio

Operating Profit/Net Sales X 100

Return on Investment Ratio

Net Profit After Interest And Taxes/ Shareholders Funds or Investments X

100

Return on Capital Employed

Ratio

Net Profit after Taxes/ Gross Capital Employed X 100

Earnings Per Share Ratio

Net Profit After Tax & Preference Dividend /No of Equity Shares

Dividend Pay Out Ratio

Dividend Per Equity Share/Earning Per Equity Share X 100

Earning Per Equity Share

Net Profit after Tax & Preference Dividend / No. of Equity Share

10

Dividend Yield Ratio

Dividend Per Share/ Market Value Per Share X 100

11

Price Earnings Ratio

Market Price Per Share Equity Share/ Earning Per Share X 100

12

Net Profit to Net Worth Ratio

Net Profit after Taxes / Shareholders Net Worth X 100

Working Capital Ratios

S. No.

RATIOS

FORMULAS

Inventory Ratio

Net Sales / Inventory

Debtors Turnover Ratio

Total Sales / Account Receivables

Debt Collection Ratio

Receivables x Months or days in a year / Net Credit Sales for the year

Creditors Turnover Ratio

Net Credit Purchases / Average Accounts Payable

Average Payment Period

Average Trade Creditors / Net Credit Purchases X 100

Working Capital Turnover Ratio

Net Sales / Working Capital

Fixed Assets Turnover Ratio

Cost of goods Sold / Total Fixed Assets

Capital Turnover Ratio

Cost of Sales / Capital Employed

Capital Structure Ratios

S. No.

RATIOS

FORMULAS

Debt Equity Ratio

Total Long Term Debts / Shareholders Fund

Proprietary Ratio

Shareholders Fund/ Total Assets

Capital Gearing ratio

Equity Share Capital / Fixed Interest Bearing Funds

Debt Service Ratio

Net profit Before Interest & Taxes / Fixed Interest Charges

Overall Profitability Ratio

S. No.

RATIOS

FORMULAS

Overall Profit Ability Ratio

Net Profit / Total Assets