Accounting Ratio Formulae

Current Ratio

Current Assets: Current Liabilities

Acid test ratio

Current assets - closing stock : current liabilities

Stock turnover

Cost of sales / average stock = x times

Average stock

(Opening + closing stock) / 2 = €x

Average period of credit given to debtors

(debtors * (12 or 52 or 365)) / credit sales = x months/weeks/days

Average period of credit received from creditors

(creditors x (12 or 52 or 365)) / credit purchases = x months/weeks/days

Gross profit percentage (margin)

(gross profit / sales) * 100 = x%

Net profit percentage (margin)

(Net profit / sales) * 100 = x%

Return on Capital Employed

((Net profit + interest) / capital employed) * 100 = x%

Return on Shareholders’ Funds

(Net Profit / Shareholders’ funds) * 100 = x%

Gross profit mark-up

(gross profit / cost of sales) * 100 = x%

Total expenses to sales

(Total expenses/ sales) * 100 = %x

Fixed interest capital to total capital

(Debentures + preference shares) / Capital Employed = %x

Interest cover

(Net profit before interest & tax) / interest = x times

Earnings per share

(Net profit after preference dividend / number of ordinary shares issued) * 100 = x cent

Dividend per ordinary share

(ordinary dividends / number of ordinary shares issued) * 100 = x €/cent

Dividend cover

Earnings per share / Dividend per ordinary share = x times