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Operating Ratios Ratio Sales Return Sales Discounts Gross Margin Cost of Goods Sold Net Profit Margin

Method of Calculation Sales Returns x 100 Sales Sales Discounts x 100 Sales Cost of Goods Sold x 100 Sales Cost of Goods Sold - Sales x 100 Sales Trading Profit Before Interest & Tax x 100 Sales Value Added x 100 Sales Tax Charge x 100 Profit Before Tax Expense x 100 Sales Trading Profit x 100 Tangible Net Assets Trading plus Other Income x 100 Total Assets Depreciation Charge x 100 Gross Depreciable Assets Total Assets Sales Sales Average Debtors Sales Average Stocks Sales Trade Creditors

Significance Measures the saleability of stock Measures the extent to which the terms of sale affect turnover Shows the relationship between costs and sales value of items sold Shows the margin between sales and costs Measures the efficiency of the organisation to generate profits from sales Measures the additional wealth created by the organisation Measures the proportion of tax charged Relates individual expenses, eg research and development, to sales Measures the efficiency of the organisation Measures the efficiency in utilizing available assets Identifies depreciable assets and the extent of the depreciation provision Measures the utilization of assets in generating sales Measures the control of credit Measures the control of stocks in relation to sales Measures the speed of payment by creditors

Productivity Tax Ratio Expense Items Return on Capital Employed Return on Total Assets Revenue and Expense Item Total Assets Turnover Debtors' Turnover Stock Turnover Creditors' Turnover

Efficiency Ratios Ratio Operating Leverage

Financial Leverage Debt Ratio

Method of Calculation Percentage change in Earnings Before Interest and Taxation (EBIT) Percentage change in Output EBIT EBIT - Interest Expense Total Liabilities Total Assets Shareholder's Funds Total Assets Total Debt Shareholder's Funds Debt + Current Liabilities x 100 Total Assets Profit Before Interest Interest

Significance Measures the extent to which fixed costs are used in the organization's operations Measures the debt utilization in financing assets Measures the proportion of assets financed through borrowings and the extent of trading on equity Shows the protection to creditors and the extent of trading on equity Shows the relationship between borrowed capital and capital invested by shareholders Measures the percentage total funds provided by creditors Measures the extent to which interest charges are covered by profits

Equity Ratio Debt to Equity Ratio

Total Debt to Total Assets Interest Cover

Liquidity Ratios Ratios Current Ratio Liquid Ratio Cash days to Sales Gross Funds to Debt No Credit Interval

Method of Calculation Current Assets Current Liabilities Current Assets - Stocks Current Liabilities Short Term Investments plus Cash x 100 Sales Gross Funds from Operations x 100 Current Liabilities and Loans Debtors plus Short Term Investments plus cash x 365 Operating expenses - Depreciation

Significance Measures the organization's liquidity position Measures the ability to meet short term liabilities Indicates the reasonableness of liquid assets in relation to sales Measures the extent to which short term obligations are covered by gross funds Measures the number of days the most liquid assets could support operating expenditures

Investment Ratios Ratios Earnings Per Share (EPS)

Earnings Yield Price Earnings Ratio

Method of Calculation Earnings before Extraordinary items but after deducting tax, minority interest and preference dividends Number of Ordinary Shares Earnings per Share (EPS) x 100 Price per Share Market Price per Share Earnings per Share Dividend per Share Market Price per Share Earnings per Share Net Dividend per Share Profit after tax but before extraordinary items and after deducting minority interest and preference dividends Equity Shareholders' Investment Ordinary and Preference Dividends x 100 Retained Earnings or Profit

Significance Shows the amount of earnings attributable to each ordinary share

Dividend Yield

Dividend Cover Return on Equity

Shows the earnings return per share based on the current share price Measures whether the price of an ordinary share is in line with the organizations' earnings Measures the return to ordinary shareholders on the current market price of the share Measures the extent to which dividends are protected by earnings Measures the efficiency in earning a satisfactory return on equity shareholders investment Shows the relationship between dividends and retained profits

Payout Ratio

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