RATIO ANALYSIS

Types of ratio

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

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

Liquid ratio Liquid assets  LA=CA-(stk +

Current liabilities prepaid
expenses.
 This ratio is also
called as quick
ratio or acid
test ratio.

BY
V.GOKUL KRISHNA PAI
 RATIO ANALYSIS

Cpital structure ratio

 Debt means long
term debt.
 Where the Co.
uses the FA on
long term lease.
 The present
value of the
lease rentals
Debt equity Debt should be
ratio equity considered as
debt

 Equity means
share holder
funds
 Eqty=share
capital +reserve
& surplus –
(miscellaneous
expn+ P&L debt
bal

 Eqty is also
called as net
worth or
proprietor fund
Int. coverage EBDITA Earning before
ratio Interest depreciation, interest,
tax, amortization
Debt service EBIT+ lease rental
coverage ratio Interest+leaserental+(preference
dividend+ loan repayment) /1-t

BY
V.GOKUL KRISHNA PAI
 RATIO ANALYSIS
Turn over ratio
Inventory turn CGS
over ratio Avg stck
(In times)
(Or)  CGS=opg stk +
Avg stck *360 pur+csk
CGS

Debtor turn over Credit sales  Debtor includes

ratio Avg debtor bill receivable
(in times)
(Or)
Avg debtor
credit sales *360

Creditor turn over Credit purchase  Creditor includes

ratio Avg creditor bills payabale
(in times)
Avg creditor
Credit purchase *360

FA assets sales
turnover ratio FA
Working capital sales
turn over ratio working capital
Capital turn over sales Capital employed
ratio capital employed can be found out
by 2 ways
 Debt +eqty
 FA+working
capital

BY
V.GOKUL KRISHNA PAI
 RATIO ANALYSIS
Profitability ratio
1. profitability on sales
G.P ratio GP  GP= sales-CGS
Sales
Operating pft ratio Operating pft  OP=GP-admin &
sales selling exp
 It is also called as
costing pft (or)
 EBIT(or)
 Net operating
income
Net pft ratio PAT PAT=Pft After Tax
sales
2. profitability on investments
Return on capital PAT+INT Refer above
employed Capital employed
Written on eqty PAT
equty
3.Miscellaneous ratio
EPS Pft available to eqty SH
no. of share
DPS Dividends
no. of share
Dividend pay out ratio DPS
EPS
(Or)
Dividend amt
pft
PE ratio MPS
EPS

BY
V.GOKUL KRISHNA PAI