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Ratio Analysis

Ratio Analysis

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Published by dypdbm
hi all this file includes all the formula of the ratio analysis in details with examples. hope this will help some one in there academics...

regard.

DYPDBM
hi all this file includes all the formula of the ratio analysis in details with examples. hope this will help some one in there academics...

regard.

DYPDBM

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Published by: dypdbm on Mar 07, 2009
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09/17/2012

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Ratio Analysis-
Relationship between items or groups of items in the financial statement.-What is financial statement?Income statementBalance sheet-expressed in terms of another figure-mathematical yardstick- measures the relation ship between two figures
IBalance Sheet Ratios:
1. Current Ratio= Current Assets / Current Liabilities
Std 2:1
 2. Liquid Ratio = Quick Assets / Quick Liabilities
Std 1:1
3. Proprietary Ratio= Proprietor’s Fund* / Total Assets
Std Neither betoo high or too low*Equity + R.S + Pref+ Surplus - Miscellaneous
4.Stock working capital Ratio:= stock / Working capital
Std 1:1Higher ratio indicates weak working capital
5. Capital Gearing Ratio = Fixed income bearing securities /Non fixed income bearing securities
High geared
= fixed interest bearing securities are greater than equityshareholders fund
Low geared
= just opposite to the above
Std 1:4
6. Debt Equity Ratio = Long term debts / Shareholders Funds
Std 2:1
7. Fixed Assets Ratio = Fixed Assets / Long term funds
II. Revenue Statement Ratios:
8.Gross Profit Ratio = Gross Profit / Net Sales
×
1009.Operating Ratio = Operating Cost / Net Sales
×
100Manufacturing Concern – highOther firms’ -low10.Expenses Ratio = Concerned Expense / Net Sales
×
10011.Net Profit Ratio = Net profit / Net Sales
×
10012.Net Operating Profit Ratio = Operating Profit / Net Sales
×
100Operating profit = GP- all expenses including finance13.Stock Turnover Ratio = Cost of Goods Sold/ Average Stock Std.: Seasonable based on nature of production
 
III Combined/ Composite Ratios:
14. Return on Capital Employed = NPBIT / Capital Employed
×
100-indicate the management efficiency-productivity of capital utilized-overall efficiency.15. Return on Proprietors Funds = NPAT / Proprietors Funds
×
10016.Return on Equity Share capital = NPAT-Pref.Dividend / Equity share capital17.Earnings per share = NPAT- Pref. Dividend / No of Equity Shares18.Dividend / Payout Ratio = Divi. Per Equity share / EPS19.Divi. Yield Ratio = Divi. Per share / Mkt price per share20.Price –Earning Ratio = Mkt. Price Per Share / EPS21.Debt Service Ratio = NPBIT / Interest( Interest coverage Ratio)22.Creditors Turnover Ratio = Credit Purchase /Average Accounts PayableC.P.Period = days/ months in a year / CTR 23.Debtors Turnover Ratio = Credit Sales / Average Accounts ReceivableD.C.Period = days/ months in a year / DTR 24.Fixed Assets Turnover Ratio = Sales / Fixed Assets25.Total Assets Turnover Ratio = Sales / Total Assets26.Working Capital Turnover Ratio = Sales / Working Capital27.Capital Turnover Ratio = Sales/ Capital employed.
 
1.Profit and Loss A/C. and Balance Sheet of SIDHARTH LTD. For the year ended 31
st
March,2007: 
Trading and Profit and Loss Account for the year ended 31
st
March 2007Dr.
 
Cr.ParticularsRs.ParticularsRs.
To Opening Stock 70,000By Sales9,00,000To Purchases5,40,000By Closing Stock 80,000To Wages2,14,000To Gross profit c/d1,56,000
9,80,0009,80,000
To Salaries 26,000By Gross profit b/d1,56,000To Rent 5,000By Interest on Invt. 5,000To Miscellaneous Expenses 15,000To Selling Expenses 10,000To Depreciation 30,000To Interest 5,000To Provision for Tax 20,000To Net profit c /d 50,000
1,61,0001,61,000Balance Sheet as on 31
st
March 2007LiabilitiesRs.AssetsRs.
Equity Share capital( RS.10)1,50,000Fixed Assets 1,60,000(-) Depreciation 30,0001,30,0008% Pref. Share capital (Rs.100)1,00,000Investment1,00,000Reserves & Surplus
 
62,000Stock 80,00010% Debenture 50,000Debtors 60,000Bank Loan ( payable after 5years)40,000 Bills Receivable 50,000Creditors 60,000Cash 85,000Provision for Tax (C.Y) 20,000Preliminary Expenses 5,000Bank Overdraft 20,000Proposed Pref .Dividend 8,000
5,10,0005,10,000Adjustments:
Market value of Equity share is Rs.12 and Dividend Paid per Equity share is Rs.2.Calculatethe following ratio:-a) Acid Test Ratiob) Capital Gearing RatioC) Operating Ratiod) Dividend Payout Ratioe) Debt Service Ratio f) Creditors Turn over Ratiog) Earning per share h) Stock Turnover Ratio. 

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