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ratios in finance

ratios in finance

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Published by splusk

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Published by: splusk on Jul 29, 2008
Copyright:Attribution Non-commercial


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Liquidity ratios:a)current ratio: current assets / current liabilitiesideal ratio: 0.67:1 to 2:1 b)acid test ratio or quick ratio:current assets-stock-prepaid expenses/ current liabilities - bank overdraftc)cash ratio: cash and bank balances+ marketable securities / current liabilitiesideal ratio: 0.1:1 to 0.5:1 profitability ratios:1)profit margin ratios:a)gross profit margin ratio: gross profit / net sales * 100 b)net profit margin ratio: net profit / net sales *1002)rate of returns ratios:a)returns on investment:earnings before interest and tax / total assets * 100 b)returns on equity:profits available for equity shareholders/ eq. sh. Capital *100c)returns on net worthprofits available for eq. sh. Holders/ net worth * 100 net worth = eq. sh capital + reserves and surplusd)returns on capital employedearnings before interest and tax – tax / capital employed *100structural ratios:1)debt equity ratio: borrowed funds / owned fundsin case of manufacturing sector ideal is 2:12)debt total asset ratio or asset cover ratio: debt / assets3)interest cover ratio: profit before interest and tax / interestturnover ratios:1)fixed assets turnover ratio : net sales / fixed assets2)stock turnover ratio: cost of goods sold / average stock 3)debtors turnover ratio: net credit sales / average debtors

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