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Please note that some of the ratios can be calculated using closing balances or average

balances.

PROFITABILITY RENTABILITET

Total assets

The return on investments reflects the ability of the company to get a return on all the invested

capital.

The ROI can be split up into the Profit margin ratio (PMR) and the Assets turnover ratio

(ATR).

Net revenue

The profit margin ratio reflects the relation between income and costs in the company - the

ability to earn profit.

Total assets

The assets turnover ratio reflects the ability of the company to adjust the funds to the

operating activities of the company.

Du Pont pyramid

ROI = PMR * ATR

1

FINANCIAL RATIOS

Equity

The return on equity reflects the ability of the company to get a return on the shareholders’

equity.

Debt/liabilities

The return on debt ratio reflects the average interest rate payable on the creditors.

That means, that the business makes a profit by investing foreign capital (liabilities)

Net revenue

The gross profit ratio reflects how many percent of the revenue is left after the cost of goods

sold have been deducted to cover the remaining costs and the net profit.

Net revenue

The contribution margin ratio reflects how much of the revenue is left when all variable costs

have been deducted.

2

FINANCIAL RATIOS

Contribution margin ratio Gross profit ratio

The breakeven sales (in kr.) reflect how much the net revenue should be to cover the costs.

Fixed costs .

Contribution margin per unit

The breakeven sales (in units) reflect how many units should be sold to make sure that the

contribution margin equals the fixed costs.

Actual net revenue – breakeven sales * 100

Actual net revenue

Fixed cost Fixed cost

The capacity ratio reflects how much contribution margin/gross the company gets for the

amount spent on fixed costs.

Indices for the relevant income and expense types reflect the development and support the

conclusion of the ratios.

Tangible fixed assets

The tangible fixed assets turnover reflects the ability of the company to adjust the tangible

fixed assets to the operating activities of the company.

3

FINANCIAL RATIOS

Current assets

The current assets turnover reflects the ability of the company to adjust the current assets to

the operating activities of the company.

Stock at the end of the year

The stock turnover ratio reflects how many times the stock will be “turned over” per year.

360

Stock turnover ratio

Trade debtors at the end of the year

The trade debtors turnover ratio reflects how many times the trade debtors will be “turned

over” per year.

360

Trade debtors turnover ratio

Trade creditors at the end of the year

Purchases = cost of goods sold + stock end of year – stock beginning of year

The trade creditors turnover ratio reflects how many times the trade creditors will be “turned

over” per year.

360

Trade creditors turnover ratio

4

FINANCIAL RATIOS

Current liabilities

The current assets ratio reflects if the company can pay the current liabilities which are due

for payment within one year. The CAR should be at least 100 to ensure a reasonable liquidity.

Current liabilities

The acid test reflects if the company can pay the current liabilities, which are due for payment

within one year.

Equity * 100

Total assets

The solvency ratio (=equity ratio) reflects how many percent of the total assets can be lost

before the owners equity is lost.

Creditors

Equity

The gearing ratio reflects how much of a business is financed from outside parties.

Number of shares

The earnings per share reflect how much profit you get for every share.

5

FINANCIAL RATIOS

Market price

EPS

The P/E ratio reflects how much the investor pays for the share in order to get the profit of

1 krone.

Total equity

Number of shares

The book value reflects how much 1 share owns of the company's equity.

Market price

Price based on book value

The ratio shows how the investors evaluate the company's financial situation and prospects.

TERMINOLOGY

ROI = ROA

PMR = ROS

Fixed assets = Non-current assets

IN DANISH

Profitability:

ROI = AG

PMR = OG

ATR = AOH

ROE = EKF

ROD = FKF

Earnings capacity:

GPR = Bruttomargin

CMR = Dækningsgrad

Breakeven sales = Nulpunktsomsætning

Safety margin = Sikkerhedsmargin

6

FINANCIAL RATIOS

Tangible fixed assets turnover ratio = Materielle anlægsaktivers omsætningshastighed

Current assets turnover ratio = Omsætningsaktivers omsætningshastighed

Stock turnover ratio = Varelagerets omsætningshastighed

Trade debtors ratio = Varedebitorers omsætningshastighed

Trade creditors ratio = Varecreditorers omsætningshastighed

Liquidity:

Current assets ratio = Likviditetsgrad I

Acid test = Likviditetsgrad II

Solvency = Soliditetsgrad

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