Formulas for interpretation of accounts

Return on Capital employed (ROCE)

(Net profit before interest * 100)/ capital employed

Gross profit percentage

(gross profit * 100)/sales

stock turnover

cost of sales/ ((op. stock+ cl. stock)/2)

Period of credit given to debtors

(Trade debtors * 12 or 52 or 365)/credit sales

Period of credit received from creditors

(trade creditors * 12 or 52 or 365)/ credit purchases

Quick ratio (Acid test)

(current assets- CL. stock): Current liabilities

Fixed interest capital to total capital (gearing)

(loans+ debentures+ preference shares * 100)/capital employed

Interest cover

net profit before interest/ interest

Earnings per share

net profit after preference dividend/# of ordinary shares issued

Price earnings ratio

market price of 1 share/ earnings per share

dividend per share

total ordinary divided/ # of ordinary shares issued

dividend yield

(dividend per share * 100)/ market price

Dividend cover

Net profit after preference dividend/ ordinary dividend

Period to recoup price

Market price/ dividend per share