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  • Financial Ratios

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    Sumaiya Sayeedi
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    The document defines and explains various financial ratios used to analyze a company's financial health and performance. It discusses liquidity ratios like the current ratio and quick ratio that measure a company's ability to meet short-term obligations. It also outlines profitability ratios such as gross profit margin, EBITDA margin, and net profit margin that evaluate how efficiently a company generates profits from its revenues. Additional ratios covered include leverage, interest coverage, turnover, and efficiency ratios that assess financial structure, debt management, and asset utilization.

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    The document defines and explains various financial ratios used to analyze a company's financial health and performance. It discusses liquidity ratios like the current ratio and quick ratio that measure a company's ability to meet short-term obligations. It also outlines profitability ratios such as gross profit margin, EBITDA margin, and net profit margin that evaluate how efficiently a company generates profits from its revenues. Additional ratios covered include leverage, interest coverage, turnover, and efficiency ratios that assess financial structure, debt management, and asset utilization.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    22 views2 pages

    Financial Ratios

    Uploaded by

    Sumaiya Sayeedi
    The document defines and explains various financial ratios used to analyze a company's financial health and performance. It discusses liquidity ratios like the current ratio and quick ratio that measure a company's ability to meet short-term obligations. It also outlines profitability ratios such as gross profit margin, EBITDA margin, and net profit margin that evaluate how efficiently a company generates profits from its revenues. Additional ratios covered include leverage, interest coverage, turnover, and efficiency ratios that assess financial structure, debt management, and asset utilization.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Financial Ratios

    Liquidity Ratios

    Current Ratio = Current Assets/Current Liabilities

    Quick Ratio/Acid Test Ratio = Current Assets –Inventories/Current Liabilities

    Cash Ratio = Cash & Marketable Securities/Current Liabilities

    (Marketable Securities will be part of Investments)

    Profitability Ratios

    Gross Profit Margin =(Gross Profit/Sales ) x 100

    EBITDA Margin= (EBITDA/Sales) x 100

    EBIT Margin= (EBIT/Sales) x 100

    Net Profit Margin= (PAT/Sales) x 100

    Return on Equity (ROE)= PAT/Net Worth

    Net worth = Share capital + Reserves & Surplus

    Return on Capital Employed (ROCE)= PBIT (1- Tax Rate)/ Total Capital Employed

    Instead of Total Capital Employed Total Assets can be taken

    Leverage Ratios

    Debt-Equity Ratio = Total Debt/Equity

    Also, Interest Bearing Debt/Equity can also be calculated

    Here Equity is, Total Share holders’ Funds

    Interest Coverage Ratio = PBIT/Interest


    Turnover/Efficiency Ratios

    Inventory Turnover = Net Sales/Inventory

    Debtors Turnover = Net Credit Sales/Debtors

    Creditors Turnover = Cost of Goods Sold/Creditors

    Fixed Assets Turnover = Net Sales/Net Fixed Assets

    Total Assets Turnover = Net Sales/Total Assets

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