RATIO ANALYSIS

Types of ratio 1. 2. 3. 4. Liquidity ratio Capital structure ratio Turnover ratio Profitability ratio

Liquidity ratio
Ratio Formula Remark
y CA are those assets intended to be held for one year. y CL will expires with in a year y Bank OD not regarded as CL.

Current ratio

Current assets Current liabilities

Liquid ratio

Liquid assets Current liabilities

y LA=CA-(stk + prepaid expenses. y This ratio is also called as quick ratio or acid test ratio.

BY
V.GOKUL KRISHNA PAI

RATIO ANALYSIS
Cpital structure ratio
y Debt means long term debt. y Where the Co. uses the FA on long term lease. y The present value of the lease rentals should be considered as debt y Equity means share holder funds y Eqty=share capital +reserve & surplus (miscellaneous expn+ P&L debt bal y Eqty is also called as net worth or proprietor fund Earning before depreciation, interest, tax, amortization

Debt equity ratio

Debt equity

Int. coverage ratio Debt service coverage ratio

EBDITA Interest EBIT+ lease rental Interest+leaserental+(preference dividend+ loan repayment) /1-t

BY
V.GOKUL KRISHNA PAI

RATIO ANALYSIS
Turn over ratio
Inventory turn over ratio CGS Avg stck (In times) (Or) Avg stck CGS Credit sales Avg debtor (in times) (Or) Avg debtor credit sales

*360

CGS=opg stk + pur+csk

Debtor turn over ratio

y Debtor includes bill receivable

*360 y Creditor includes bills payabale

Creditor turn over ratio

Credit purchase Avg creditor (in times) Avg creditor Credit purchase *360 sales FA sales working capital sales capital employed

FA assets turnover ratio Working capital turn over ratio Capital turn over ratio

Capital employed can be found out by 2 ways y Debt +eqty y FA+working capital

BY
V.GOKUL KRISHNA PAI

RATIO ANALYSIS
Profitability ratio 1. profitability on sales
G.P ratio Operating pft ratio GP Sales Operating pft sales y GP= sales-CGS y OP=GP-admin & selling exp y It is also called as costing pft (or) y EBIT(or) y Net operating income PAT=Pft After Tax

Net pft ratio

PAT sales

2. profitability on investments
Return on capital employed Written on eqty PAT+INT Capital employed PAT equty Refer above

3.Miscellaneous ratio
EPS DPS Dividend pay out ratio Pft available to eqty SH no. of share Dividends no. of share DPS EPS (Or) Dividend amt pft MPS EPS

PE ratio

BY
V.GOKUL KRISHNA PAI