1.

Current ratio =

Current assets
Current liabilities

2. Acidtest ratio =

Quick assets
Current liabilities

3. Inventory turnover ratio =

Cost of goods sold

Average inventory

4. Debtors turnover ratio =

Net Credit Sales

Average debtors

5. Creditors turnover ratio =

Net credit purchases

Average creditors

6. Defensive-interval ratio =

Liquid assets
Projected daily cash requirement

7. Cash-flow from operations ratio =

Cash flow

operations
Current liabilities

8. D/E ratio =

Longterm debt
'
Shareholder s equity

9. D/E ratio =

Total debt
Shareholder s ' equity

10. Debt to total capital ratio =

Longterm debt
Permanent capital

11. Debt to total assets/capital ratio =

Total debt
Total assets

12.

Proprieto r ' s funds

100
Total assets

13. Interest coverage =

EBIT
Interest

14. Dividend coverage =

EAT
Preference dividend

15. Total fixed charge coverage =

Preference
EBIT + Lease payment
Interest + Lease payments +(dividend + Instalment of principal)/(1t)

16. Total cash flow coverage

EBIT + Lease Payments+ Depreciation+ Noncash expenses

( Principal repayment ) ( Preference dividend)
Lease payment + Interest +
+
(1t)
(1t)

17.

EA T t + Interest t + Depreciationt +OA t

DSCR =

t =1

Instalment t
t =1

18.

Gross profit margin =

Gross profit
100
Sales

19.

Operating profit ratio =

Earnings before interest taxes(EBIT )

Net sales

20.

Pre-tax profit ratio =

Earnings before taxes(EBT )

Net sales

21.

Net profit ratio =

Earnings after interesttaxes (EAT )

Net sales

22.

Cost of goods sold ratio =

Cost of goods sold

100
Net sales

23.

Operating expenses ratio =

24.

Administrative expenses ratio =

Administrative expenses+ Selling expenses

100
Net Sales
Administrative expenses
100
Net sales

Selling expenses
100
Net sales

25.

Selling expenses ratio =

26.

Operating ratio =

Cost of goods sold+Operating expenses

100
Net sales

27.

Financial expenses ratio =

Financial expenses
100
Net sales

28.

Return on assets (ROA) =

Net profit after taxes

100
Average total assets

29.

ROA =

Net profit after taxes+ Interest

100
Average total assets

30.

ROA =

Net profit after taxes+ Interest

Average tangible assets

31.

ROA =

Average
Net profit after taxes+ Interest
assets

32.

ROA =

33.

ROCE =

EBIT
100
Average total capital employed

34.

ROCE =

Net profit after taxes+ Interest Tax advantage on interest

100
Average total capital employed

35.

ROCE =

Net profit after taxes+ Interest Tax advantage on interest

Average total capitalemployed

36.

Return on total shareholders equity = Average total shareholder s' equity

37.

Return on equity funds= Average ordinary shareholder s ' equitynet worth 100

100
100

EAT + ( InterestTax advantage on interest ) After taxinterest cost

Average total assets/Tangible assets/ assets

100

Net profit after taxes

Net profit after taxesPreference dividend

100

38.

Net profit available

equityholders
Number of ordinary shares outstanding

EPS =

Net profit availableowners+ Depreciation+ Amortisation

+ Noncash expenses
Number of equity shares outstanding

39.

Cash EPS =

40.

Book value per share =

Net worth
Number of equity shares outstanding

41.

P/B ratio =

MPS
BPS

42.

DPS =
Dividend paid

ordinary shareholders

Number of ordinary shares outstanding

43.

D/P ratio =

Total dividend ( cash dividend )

Total net profit belonging
equityholders equityholders 100

44.

D/P =

Dividend per ordinary share ( DPS )

100
Earnings per share ( EPS )

45.

Earnings yield =

EPS
100
Market value per share

46.

Dividend yield =

DPS
100
Market value per share

47.

P/E ratio =

Market price of share

EPS

48.

Inventory turnover =

Cost of goods sold

Average Inventory

49.

Inventory turnover =

Sales
Closing inventory

50.

Raw materials turnover =

Cost of raw materials used

Average raw material inventory

51.

Work-in-progress turnover =

Cost of goods manufactured

Average work progressinventory

52.

Debtor turnover =

Credit sales
Average debtors+ Average bills receivable(B/ R)

53.

Debtors turnover =

Total sales
Debtors + Bills receivable

54.

Average collection period =

Months ( days ) a year

Debtors turnover

Average Debtors+ Average ( B/ R)

Months ( days ) a year ( )

55.

Alternatively =

56.

Total assets turnover =

Cost of goods sold

Average total assets

57.

Fixed assets turnover =

Average
Cost of goods sold
assets

58.

Capital turnover =

Cost of goods sold

Average capital employed

59.

Current assets turnover =

Cost of goods sold

Average current assets

60.

Working capital turnover ratio =

Cost of goods sold

Net working capital

61.

Earning power =

62.

Earning power =

Net profit margin Assets turnover

Earnings after taxes
Sales
EAT

=
Sales
Total assets Totalassets

63.

Earnings after taxes , EAT Sales

Sales
Assets

Assets
Equity

64.

Net profit ratio () Assets turnover () Financial leverage/Equity multiplier

65.

Net profit ratio Assets turnover Financial leverage

66.

ROE = (ROA Interest cost Assets) Assets equity

67.

EAT
EBT EBIT Net Profit

=
Sales
Earnings before taxes(EBT ) EBIT Sales

68.

EAT
EBT

EBT

EBIT

EBIT Sales

Sales Assets

Assets
Equity

Internal Growth Rate (IGR)

The IGR is the maximum rate at which a firm can grow (in terms of sales or
assets) without external financing of any kind. To determine the IGR the
following assumptions are made:
(i)
There is an increase in assets of the firm in proportion to the sales,
(ii)
The net profit margin after taxes (EAT) is in direct proportion to
sales,
(iii)
The firm has a target dividend payout ratio (in other words,
retention ratio) which it wants to maintain,
(iv)
The firm wants to grow at a rate which is warranted by its
retentions. In other words, the firm does not raise external funds
(neither equity nor debt) to finance assets.

69.

ROA b

IGR = 1(ROA b)

Sustainable Growth Rate (SGR)

The SGR is the maximum rate at which the firm can grow by using internal
sources (retained earnings) as well as additional external debt but without
increasing its financial leverage (debt equity ratio). To determine SGR,
the two additional assumptions are made:
(i)
The firm has a target capital structure (D/E ratio) which it wants to
maintain,
(ii)
The firm does not intend to sell new equity shares as it is a costly
source of finance.
70.

ROE b

SGR = 1(ROE b)

b= retention ratio i.e (1-dividend pay out ratio)

Since ROE is the product of net profit margin (P), asset turn over (A) and
financial leverage (A/E) SGR can be decomposed as shown below(71)
71.

SGR =

P A A / E b
1
P A A / E b