SL No

A
1
2
3
4

Description
LIQUIDITY RATIOS
Current Ratio
Quick Ratio or Acid test Ratio
Absolute Cash Ratio
Interval Measure

CAPITAL STRUCTRE RATIOS

Equity to Total Funds Ratio
Debt Equity Ratio
Capital Gearing Ratio
Fixed Asset to Long Term Fund Ratio
Proprietary Ratios
Funded Debt to Total Capitalisation Ratio

1
2
3
4
5
6

COVERAGE RATIOS
1 Debt Service Coverage Ratio
2 Interest Coverage Ratio
3 Preference Dividend Coverage Ratio

D
1
2
3
4
5
6
7

TURNOVER RATIOS
Capital Turnover Ratio
Fixed Asset Turnover Ratio
Working Capital Turnover Ratio
Finished Goods or Stock Turnover ratio
WIP Turnover Ratio
Debtors Turnover ratio
Creditors Turnover ratio

1
2
3
4
5
6

PROFITABILITY RATOS BASED ON SALES

Gross Profit ratio
Operating profit Ratio
Net profit Ratio
Contribution Sales Ratio
Expense Ratio
Operating Ratio

1
2
3
4
5
6

PROFITABILITY RATOS OWNERS VIEW POINT

Return on investment (ROI) or return on net capital
employed
Return on Equity
Earnings Per Share
Dividend Per Share
Return On Assets
Price Earning Ratio

Link
Current_Ratio
Quick_Ratio_or__Acid_test_Ratio
Absolute_Cash_Ratio
Interval_Measure

Equity_to_Total_Funds_Ratios
Debt_Equity_Ratio
Capital_Gearing_Ratio
Fixed_Asset_to_Long_Term_Fund_Ratio
Proprietary_Ratios
Funded_Debt_to_Total_Capitalisation_Ratio

Debt_Service_Coverage_Ratio
Interest_Coverage_Ratio
Preference_Dividend_Coverage_Ratio

Capital_Turnover_Ratio
Fixed_Asset_Turnover_Ratio
Working_Capital_Turnover_Ratio
Finished_Goods_or_Stock_Turnover_ratio
WIP_Turnover_Ratio
Debtors_Turnover_ratio
Creditors_Turnover_ratio

Gross_Profit_ratio
Operating_profit_Ratio
Net_profit_Ratio
Contribution_Sales_Ratio
Expense_Ratio
Operating_Ratio

Return_on_investment__ROI__or_return_on_capital_employed
Return_on_Equity
Earnings_Per_Share
Dividend_Per_Share
Return_On_Assets
Price_Earning_Ratio

A. LIQUIDITY RATIOS - SHORT TERM SOLVENCY

No Ratio

Formula

Numerator

Current Ratio

Current Assets
Current Liabilities

Inventories
+ Debtors
+Cash & Bank
+Receivables/Accruals
+Short term Loans
+Marketable Investments

Quick Ratio or
Acid test Ratio

Quick Assets
Current Liabilities

Current Assets
Less: Inventories
Less Prepaid Expenses

Absolute Cash Ratio

(Cash + Marketable securuties)

Current Liabilities

Interval Measure

Quick Assets
Cash Expenses per Day

Cash In Hand
+Balance at Bank
+Marketable securuties & short
Term investments

Current Assets
Less: Inventories
Less Prepaid Expenses

B. CAPITAL STRUCTRE RATIOS-INDICATOR OF FINANCING TECHNIQUES AND LONG T

No Ratio

Formula

Numerator

Equity to Total Funds

Ratios

Share Holders Fund

Total Funds

Debt Equity Ratio

Debt
Equity

3 Capital Gearing Ratio

Fixed Charge Bearing Capital

Equity share holders Funds

Equity Share Capital

+Preference Share Capital
+Reserves and Surplus
Less Accumulated Losses
Long term borrowed funds, ie
Debentures,Long term loans from
institutions

Preference Share Capital

+Debentures
+ Long Term Loans

Fixed Asset to Long

Term Fund Ratio

Fixed Assets
Long Term Funds

Net Fixed Assets ie

Gross Block
Less Depreciation

Proprietary Ratios

Proprietary Funds
Total Assets

Equity Share Capital

+ Preference Share Capital
+Reserves & Surplus
Less Accumulated Reserves

Funded Debt to Total

Capitalisation Ratio

Funded Debt
Total Capitalisation

Debentures+ Long term loans

C. COVERAGE RATIOS - ABILITY TO SERVE FIXED LIABILITIES

No Ratio

Debt Service
Coverage Ratio

Formula

Numerator
Net Profit after Taxation
+ Taxation
+ Interest on Debt Funds
+ Non Cash Operating expense
+ Non Operating Adjustments

Earnings for Debt service

(Interest + Instalment)

Interest Coverage
Ratio

Earnings before Interest & Tax

Interest

Preference Dividend
Coverage Ratio

Earnings after Tax

Preference Dividend

Sales
Less variable cost
Less Fixed Cost(excluding Int)
or
EAT+Tax+ Interest
EAT

D. TURNOVER / ACTIVITY / PERFORMANCE RATIOS

No Ratio

Formula

Numerator

Capital Turnover
Ratio

Sales
Capital Employed

Sales net of returns

Fixed Asset Turnover

Ratio

Turnover
Fixed Assets

Sales Net of returns

Working Capital
Turnover Ratio

Turnover
Net Working Capital

Finished Goods or
Stock Turnover ratio

Cost of Goods Sold

Average Stock

WIP Turnover Ratio

Factory Cost
Average stock o WIP

Debtors Turnover
ratio

Credit Sales
Average Accounts receivable

Creditors Turnover
ratio

Credit Purchases
Average Accounts payable

Sales Net of returns

For Manufacturers
Opening Stock
+Cost fo production
less Closing stock
For Traders
Opening Stock
+ Purchases
Less Closing stock

Materials +wages+Production OH

Credit Sales net of returns

Credit Purchases Net of returns if

any

E. PROFITABILITY RATOS BASED ON SALES

No Ratio
1

Gross Profit ratio

2 Operating profit Ratio

Formula

Numerator
Gross profit
Sales

Operating profit
Sales

Net profit Ratio

Net profit
Sales

Contribution Sales
Ratio

Contribution
Sales

Expense Ratio

Expense
Sales

Gross profit As per trading

Account
Sales Less Cost of sales
or
Net profit
Add Non operating expenses
Less Non operating Incomes
Net profit

Sales less Variable costs

Individual Expense

Operating Ratio

No Ratio

Return on investment
1 (ROI) or return on
net capital employed

COGS+Office and Administrative

COGS+Office and Administrative
Expenses+Selling and Distribution
Expenses+Selling and
Expenses
Distribution Expenses
Sales
F. PROFITABILITY RATOS OWNERS VIEW POINT
Formula

Numerator

Total Earnings
Total capital Employed

Earnings before Interest and

taxes
Add: Non Operating incomes like
rents,interest and dividends

Return on Equity

Earnings After Tax

Net Worth

Profit After Taxes

Earnings Per Share

(PAT-Preference Dividend)
Number of Equity Shares

Profit After Taxes

Less Preference Dividend

Dividend Per Share

Dividend
Number of Equity Shares

Return On Assets

Net Profit after Taxes

Average Total Assets

Net Profit After Taxes

Price Earning Ratio

Market Price Per Share

Earning Per Share

Market Price Per Share

Profit distributed to equity share

holders

SHORT TERM SOLVENCY

Denominator

Significance

Sundry Creditors (For Goods)

+Outstanding Expenses
+Short Term Loans & advances
+Bank Overdraft/ Cash Credit
+Provisio for Taxation
+Proposed or Unclaimed Dividend

Ability to
repay short
term
commitmnets prompltly. Ideal ratio is
2:1.High ratio indicates existence of
idle current assets

Sundry Creditors (For Goods)

+Outstanding Expenses
+Short Term Loans & advances
+Bank Overdraft/ Cash Credit
+Provisio for Taxation
+Proposed or Unclaimed Dividend

Ability
to
meet
immediate
liabilities.Ideal ratio is 1.33:1

Sundry Creditors (For Goods)

+Outstanding Expenses
+Short Term Loans & advances
+Bank Overdraft/ Cash Credit
+Provisio for Taxation
+Proposed or Unclaimed Dividend

Availibility of cash to meet short

term commitments

Annual Cash Expenses

365
Ability to
Cash expenses=Total expenses Less expenses
Depreciaton and write offs

meet

regular

cash

NANCING TECHNIQUES AND LONG TERM SOLVENCY

Denominator

Total Long term Funds employed in

business =Debts+Equity

Equity Share Capital

+ Preference Share Capital
+Reserves and Surplus
Less Accumulated losses if any

Equity Share Capital

+ Reserves and Surplus
Less Accumulated Losses if any

Significance
Indicates long term solvency; mode
of financing; extend of own funds
used in operations

Indicates relationship between debt

& Equity, Ideal ratio is 2:1

Shows Proportion of fixed charge

(dividend or interest) bearing capital
to equity funds, the extend of
advantage or leverage enjoyed by
equity share holders

Share Holders Fund

+ Debt Funds (Numerator
1+Numerator 2 as in 1 & 20

shows proprtion of Fixed Assets

finanaced by by long term funds.
Indicats the financing approach
followd
by
the
firm.conservative,matching
or
aggressive; idea ratio is less than 1

Net Fixed Assets

+ Total Current Assets
(Only tangiable Assets will be
included)

Shows extend of owners

utilised in financing assets

fund

Total Capitalisation =Debts+Equity

TY TO SERVE FIXED LIABILITIES

Denominator

Significance

Interest on Debt
+ Instalment of Debt
(Principal Repaid)

Indicates extend of current earnings

available for meeting commitments
and outflow towards interest and
instalments; Ideal ratio must be
between 2 to 3 times

Interest on debt Fund

Indicates ability to meet interest

obligations of the current year.
Should be generally greater than 1

Dividend on Preference Share Capital

Indicates ability to pay dividend on

preference share capital

Y / PERFORMANCE RATIOS
Denominator

Significance

Equity share Capital

+ Preference Share Capital
+Reserves & Surplus
+ Debentures
+ Long Term Loans
Less Accumulated Losses

Ability to generate sales per rupee

of long term investment. The higher
the turnover ratio the better is

Net Fixed Assets

Ability to generate sales per rupee

of Fixed Asset

Current Assets Less Current liabilities

Opening Stock +Closing Stock

2
Maximum Stock + Minimum Stock
2

Ability to generate sales per rupee

of Fixed Assets

Indicates how fast inventory is

used / Sold
A higher turnover ratio generally
indicates fast moving material while
low ratio may mean dead or
excessive stock.

Opening WIP+Closing WIP

2

Indicates the WIP movement

/Produaction cycle.

AR= Debtors+ BR
Average AR=
Opening Bal+Closing Bal
2

Indicates speed of collection of

credit sales

AP= Creditors+ BP
Average AP=
Opening Bal+Closing Bal
2

Indicates Velocity of debt payment

ATOS BASED ON SALES

Denominator

Significance

sales net of returns

Indicator of basic profitability

sales net of returns

Indicator of Operating performance

of businesss

sales net of returns

Indicator of overall profitabillity

sales net of returns

Indicator of profitability in marginal

costing

sales net of returns

Compares expense to sales

sales net of returns

Indicator of the degree to which

organisation expenses are covered
by its core business

OS OWNERS VIEW POINT

Denominator

Significance

Asset Route:
Net fixed assets (Including intangiable
assets like patents,but not fictitiious
assets miscellaneous expenditure not
w/off)
+Net Working Capital
Liability Route
Equity Share Capital
+Prefence share capital
+reserves & Surplus
+Debentures and long term Loans
Less Accumulated Losses
Less Non trade Investments

Overall profitability of the business

for the capital employed; indicates
the return on the total capital
employed.
Comparison of ROCE with rate of
interest of debt leads to financial
leverage. If ROCE> Interest rate,
use of debt funds is justified

Net Fixed Assets

+Net working Capital
Less External Liabilites(Long Term)

Profitability of Equity funds invested

in the business

Number of Equity shares Outstanding=

Equity Share Capital
Face value per share

Return or income per share,

whether or not distributed as
dividends

Number of Equity shares Outstanding=

Amounts of dividend distributed per
Equity Share Capital
share
Face value per share

1/2 of Opening and Closing Balance

Net Income per rupee of average

fixed assets

Earning Per Share

Indicates how much investors are

willing to pay per rupee of current
earnings