Accountancy : Ratio Formulas/definition/others

Capital Employed

Total liability - Current liability , Shareholders fund + long term debt , Net fixed asset + working capital

Equity

Shareholders fund , Total liability - total debt

Total asset to debt ratio

Total asset / long term debts

Cost of goods sold ( COGS )

Opening inventory + net purchases + direct expenses - closing inventoy

Trade payable ratio

Net credit purchases / Average Trade payable

Fixed asset turnover ratio

RFO ( net sales) /net fixed assets

Working capital turnover ratio

RFO ( net sales ) / working capital

Operating Ratio

Operating cost / RFO * 100

Operating cost

COGS + Operating Expenses

Solvency Ratios
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Proportion of debt and equity / long term debt obligations

Profitability Ratios

measure the income or operating success of a company for a given period of time

Liquidity Ratios include

Current Ratio & Quick/Liquid/Acid Test Ratio

Solvency Ratios include :

Debt to equity , Total asset to total debt & Proprietary Ratios

Activity Ratios include

Inventory turnover , Trade receivable turnover , Trade Payable turnover, Fixed asset turnover , Woking capital turnover ratios

Profitability Ratios include

Gross Profit Ratio, Operating Ratio , Operating Profit Ratio , Net profit turnover ratio, Return on Investment, EPS etc.

Assets = liability

Non current asset + Current Assent = Shareholders fund + Total debt

Current Ratio

CA/CL

Quick Ratio (Acid Test)

(Current Assets - Inventory - Prepaid Expense) / Current Liabilities

Working Capital

current assets - current liabilities

Debt to Equity Ratio

Total Debt/Total Equity

Ideal liquidity ratio

2:1

Idea Quick Ratio

1:1

Ideal debt to equity ratio

2:1

Proprietary Ratio

Shareholders Fund / Total assets

Inventory Turnover Ratios

COGS / avg inventory

Gross Profit

Sales - COGS

Average Inventory

opening inventory + closing inventory / 2

If sales is 1 / x then cost is ?

1 / (x-1) e.g. Sales = 1/7 then cost is 1/6

Trade receivable Turnover Ratio

Net credit sales / Average trade receivable

Average Trade Receivables

Opening ( debtors + bills receivables ) + closing ( '' ) / 2

Collection Period

1 / Trade receivable turnover ratio * 12 / 365

Average trade payable

Opening ( creditors+ bills payable) + closing ( '' ) / 2

Gross profit ratio

Gross profit / Net sales ( RFO ) * 100

Operating Profit Ratio

Operating Profit / RFO * 100

Net Profit Ratio

Net Profit/ RFO * 100

Net profit

Gross Profit - All Expenses + income

Return on investment

PBIT / Capital Employed * 100

Earning per share (EPS)

Net profit after interest and taxes / No. of equity shares

Liquidity Ratios

a measure of the ability of a business to pay its current debts as they become due and to provide for an unexpected need for cash

Activity Ratios

measures of how effectively the company uses its assets