Ratio analysis is used to get the true picture of a firm's financial position, followin are some

commonly used ratios:

1- Profitability ratios:

a - Profitability ration: (Gross profit / sales) X 100 b - Net profit Margan: (Net profit / sales) X
100 c - Return on capital employed: (net profit / financial cost) / (equity + long term debt) d -
return on asset:(net profit / total assets) X 100

2- Liqudity ratios:
a - Currant ratio: currant assets / currant liabilities b - Quick ratio/acid test ratio: quick assets /
currant liabilities

-Note- quick assets = currant assets - inventory.

c - Cash ratio: (cash + Marketable securities) / Currant liabilities

3- Efficency ratios:
a - Inventory turn over: CGS / Average inventory

-note- average inventory = (inventory a + inventory b) / 2

b - Days inventory: no of days / inventory turn over c - Receiveable turn over: sales (credit) /
Average receivable d - Days receiveable: no of days / receivable turnover e - Payable
turnover: Purchases (credit) / Average Payable f - days payable turnover: no of days / payable
turnover

4- Leverage Ratios:
a - Debt to equity ratio: debt / equity

-note- debt here is considered as total debt = long + short

b - Debt to Assets ratio: Debt / Total assets c - Debt/Equity: Debt / total capitalization

-note- we will only take long term debt here, total capitalisation = total debt + equity
5- Coverage ratios:
a - Coveratio: Earnings Before Interest & Tax / Financial Cost