FINANCIAL STATEMENT RATIOS

Sr. Name of Ratio Formula Result Components Substitute of Comments

No. Components
1 2 3 4 5 6 7

Profitability Ratios
1 G.P = Net Sale – CGS
Gross Profit Ratio Gross Profit x 100 % Net Sale = Sale – Sale No Higher Ratio is
Net Sale Return & allowance – Sale favorable
Sale Discount
2 Operating Profit Operating Profit x 100 % Operating Profit = G.P No Higher Ratio is
Ratio Net Sale – Operating Expenses Sale favorable
3 Profit before tax Profit before tax x 100 % Profit before tax=OP- No Higher Ratio is
Ratio Net Sales Interest Sales favorable
Net Profit after Tax =
4 Net Profit Ratio Net Profit after Tax x 100 % Net profit – Tax paid on Net Profit Higher Ratio is
Net Sale profit Sale favorable
5 Return on Capital Capital Employed = Total Operating Higher Ratio is
Net Profit Before Interest & Tax Assets – Current Liabilities
Employed % Avg Capital Employed=Two Profit favorable
Avg Capital Employed
years Capital Employed/2
6 Return on Equity Net Profit after Tax x 100 % Paid up Capital Net Profit Higher Ratio is
Equity No favorable

7 Capital turnover Net Sales x 100 % Sales Higher Ratio is

Avg Capital Employed No favorable

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 Return on Investment ratios
6 Net Worth or SHD
Return on Net Profit after Tax x 100 Funds or Shareholder Net Profit Higher Ratio is
Shareholder’s Shareholder Invest % investment = Share No favorable
Investment ment or Fund Capital + Reserves and
Surplus or Total Assets
– out sider liabilities
7 Return on Gross Net Profit Before Interest & Tax % Gross Capital Operating Higher Ratio is
Capital Employed Gross Capital Employed Employed =Total Assets Profit favorable

9 Earning Per Share Net Profit after Tax No of No. of Shares in Paid up Net Profit Higher Ratio is
No. of Shares Share Capital No favorable

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 Liquidity Ratios
1 Current Ratio Current Assets 0:1 Current Assets = Total Standard = 2:1
Current Liabilities Assets – Fixed Assets No above standard
Current Liabilities = Total
Out Side Liabilities – Long
= favorable
Term Liabilities below standard
= unfavorable
2 Liquid Quick Assets 0:1 Quick Assets = Current Standard = 1:1
Ratio/Quick Current Liabilities Assets – Closing Stock – No above standard =
Ratio/Acid Test Prepaid Expenses favorable below
Ratio standard =
unfavorable
3 Defensive Interval Quick Assets 0:1 Avg daily cash from This ratio show
(Days) Avg daily cash from operations= (Previous No how many days
operations Debtors + Current company can
Sales – Current survive without
Debtors)/365 cash

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 Efficiency Ratios
16 Stock Days Stock x 100 Lower Ratio is
C.G.S Days favorable

18 Debtor Days Trade Debtors x 365 Accounts Lower Ratio is

Net Credit Sales Days Receivable favorable
20 Credit Days Trade Creditors x 365 Net Purchases Higher Ratio is
Cost of Sales Days favorable

21 Working Capital _____C.G.S.____ Working Capital = Higher Ratio is

Turnover Ratio Working Capital Times Current Assets – Sale favorable
Current Liabilities No
22 Fixed Assets ____C.G.S.____ Net Fixed Assets = Higher Ratio is
Turnover Ratio Net Fixed Assets Times Fixed Assets – Sale favorable
Depreciation No
23 Total Assets ___Sales___ Times No Higher Ratio is
Turnover Ratio Total Assets favorable

Long Term Solvency Ratios OR Leverage Ratios

24 Equity Ratio or Total Equity 0:1 Share Capital + No Higher Ratio is
Proprietary Ratio Total Assets Reserves & Surpluses favorable
25 Debt Ratio Total Debt 0:1 Short + Long Term No Lower Ratio is
Total Assets Liabilities favorable
26 Debt Equity Ratio I. Total Debts
or Debt to Net Total Equity
Worth Ratio II. Long Term Debts Long Term Funds = 1:1 OR Lower
Shareholder Funds 0:1 Shareholder Funds + No Ratio is
III. Long Term Debts Long Term Loans favorable
Long Term Funds

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27 Fixed Assets Ratio __Fixed Assets__ 0:1 Net Fixed Assets No
Long Term Funds

28 Debt service ratio Net Profit before interest and tax 0:1 No Higher Ratio is
Fixed interest charges favorable

BEST OF LUCK

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