Liquidity and Solvency

i) Current Ratio

Current Assets /Current Liabilities

ii) Liquid/Quick/ Acid Test Ratio

Current assets - Stock - Prepaid Expenses/Current Liabilities –Bank Overdraft –Pre-received Income

iii) Absolute Liquid Ratio

Cash + Marketable securities/Current Liabilities

iv) Proprietary Ratio

Proprietor’s Fund/Total Assets [Proprietor’s funds = Equity Capital + Preference Capital + Reserves and Surplus + Accumulated funds - Debit balances of P & L A/c and Miscellaneous Expenses]

Capitalisation

i) Debt Equity Ratio

Long term Debt/Equity [Debt = Loans, debentures etc. Equity = Proprietor’s funds]

ii) Capital Gearing Ratio

Fixed cost funds/Funds not carrying fixed cost [Fixed cost funds = Preference share capital, Debentures, Loans from  banks, financial institutions, other unsecured loans]. [Funds not carrying fixed cost = Equity share capital + undistributed profit - P & L A/c (Dr. Bal.) - Misc. expenses].

Profitability and management efficiency

i) Gross Profit Ratio

(Gross Profit/Net Sales) x 100

ii) Net Profit Ratio

(Net Profit/Net Sales) x 100
[Net profit may be either Operating Net profit, Profit before tax or Profit after tax].

iii) Return on Capital Employed (ROCE) (ROI)

(Net profit/Capital employed) x 100 [Capital employed = Fixed Assets + Current Assets - Current Liabilities].

Return on Capital Employed (ROCE) (ROI) Du Pont Analysis

Profit Margin x Total Assets Turnover ratio

iv) Return on Proprietors fund/Net Worth (RONW)

Profit after tax/Proprietor’s funds

v) Return on Equity (ROE)

(Profit after tax less Prefernce Dividend / Equity Share Capital)x100

Return on Equity (ROE) Du Pont Analysis

Profit Margin x Total Asset Turnover x Financial Leverage

vi) Earnings per share [EPS]

Profit after tax less Prefernce Dividend/ Total  No. of Equity Shares

vii) Dividend per share [DPS]

Total Dividend paid to equity shareholders/
Number of equity shares

Management efficiency

i) Stock Turnover

Cost of goods sold/Average Stock

ii) Debtor’s Turnover Rate

Credit sales/ Average. Debtors + Bills receivable

iii) Debtors Collection Period

(Debtors + Bills receivable/Net Credit sales)x 365

iv) Creditor’s Turnover Rate

Credit purchases/Average Creditors+ Bills Payable

iv) Creditor’s Payment Period

(Creditors + Bills payable / Credit purchases) x 365

vi)  Operating Ratio

(Operating Costs/Net sales) x 100 [Operating Cost = Cost of goods sold + Operating expenses (viz. Administrative, selling & finance expenses)]

Number of times preference dividends covered by net profit

Preference shareholders’ coverage ratio

Net profit after tax/Preference Dividend

Number of times equity dividends covered by net profit

Equity shareholder’s coverage ratio

Net profit after interest- Preferene Dividend/Equity Dividend

Number of times fixed interest covered by net profit

Interest coverage  ratio

Net profit before Interest & Tax (PBIT)/Fixed interest charges

Relationship between net profit and total fixed charges

Total coverage ratio

Net profit before Interest & Tax)(PBIT)/Total fixed charges

The idle capacity in the Organisation

Fixed expenses to total cost ratio

Fixed expenses/Total cost

Material consumption to sales

Material consumption to sales ratio

Material consumption/Sales

Wages to sales

Wages to sales ratio

Wages/Sales

The future market price of a share

Price Earnings ratio

Market price of a share (MPS)/Earnings per share (EPS)