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FINANCIAL RATIOS

FINANCIAL ANALYSIS BY CALCULATION OF RATIOS


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

PROFITABILITY RENTABILITET

1. Return on investment (ROI) afkastningsgrad

Profit before interest/EBIT * 100


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).

2. Profit margin ratio (PMR) overskudsgrad

Profit before interest/EBIT * 100


Net revenue

The profit margin ratio reflects the relation between income and costs in the company - the
ability to earn profit.

3. Assets turnover ratio (ATR) aktivernes omsætningshastighed

Net revenue times


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

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FINANCIAL RATIOS

4. Return on equity (ROE) egenkapitalens forrentning

Profit after interest * 100


Equity

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

5. Return on debt (ROD) fremmedkapitalens forrentning

Interest expenses * 100


Debt/liabilities

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

If ROI > ROD then ROE > ROI


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

EARNINGS CAPACITY INDTJENINGSEVNE

Profit margin ratio (PMR)

6. Gross profit ratio (GPR) bruttomargin

Gross profit * 100


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.

7. Contribution margin ratio (CMR) dækningsgrad

Contribution margin * 100


Net revenue

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

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FINANCIAL RATIOS

8. Breakeven sales (kr.) nulpunktsomsætning

Fixed costs * 100 or Fixed costs * 100


Contribution margin ratio Gross profit ratio

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

Breakeven sales (units)

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.

Safety margin (%) sikkerhedsmargin


Actual net revenue – breakeven sales * 100
Actual net revenue

9. Capacity ratio (CR) kapacitetsgrad

Contribution margin or Gross profit


Fixed cost Fixed cost

The capacity ratio reflects how much contribution margin/gross the company gets for the
amount spent on fixed costs.

10. Indices for income and expenses Index

Indices for the relevant income and expense types reflect the development and support the
conclusion of the ratios.

EFFICIENCY IN THE USE OF ASSETS Kapitaltilpasning

Assets turnover ratio (ATR)

11. Tangible fixed assets turnover ratio (TFATO) anlægsaktivers omsætningshastighed

Net revenue times


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.

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FINANCIAL RATIOS

12. Current assets turnover ratio (CATO) omsætningsaktivers omsætningshastighed

Net revenue times


Current assets

The current assets turnover reflects the ability of the company to adjust the current assets to
the operating activities of the company.

13. Stock (inventory) turnover ratio (STR) varelagerets omsætningshastighed

Cost of goods sold or variable costs. times


Stock at the end of the year

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

Stock turnover period in days

360
Stock turnover ratio

14. Trade debtors turnover ratio (TDTR) varedeibtorers omsætningshastighed

Revenue on credit * 1,25 times


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.

Trade debtors turnover period in days

360
Trade debtors turnover ratio

15. Trade creditors turnover ratio (TCTR) varekreditorers omsætningshastighed

Purchases on credit * 1,25 times


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.

Trade creditors turnover period in days

360
Trade creditors turnover ratio

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FINANCIAL RATIOS

LIQUIDITY AND SOLVENCY Likviditet og soliditet

16. Current assets ratio (CAR) likviditetsgrad I

Current assets * 100


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.

Acid test ratio likviditetsgrad II

(Current assets – stock/inventory) * 100


Current liabilities

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

17. Solvency ratio soliditetsgrad

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.

Gearing ratio gearing

Creditors
Equity

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

INVESTORS DECISIONS / RELATIONS investor relaterede nøgletal

18. Earnings per share (EPS) indtjening per aktie

Profit for the year


Number of shares

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

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FINANCIAL RATIOS

19. Price/earning (PE)

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.

20. Book value (PRICE/BV)

Total equity
Number of shares

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

21. Price/Book value

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

Total assets = Total balance sheet


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

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FINANCIAL RATIOS

Capacity ratio = Kapacitetsgrad

Efficiency in the use of assets:


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