Horizontal analysis

Trendly analysis

Vertical analysis

Sales Assets/ liabilities & equities

Financial ratios:

1. Profitability
2. Leverage ratios
3. Turnover/ Operational
4. Pricing

Assets= Liabilities + Equity

1. Profitability
a. Gross margin ratio
Operating revenue−Operating expense
b. GMR=
Sales
Net profit
c. N MR=
Sales
Profit
d. ROA=
Assets
2. Leverage ratios
Total Debt
a. DE=
Total equity
liabilities
b. ¿= Equity/asset = 4/7 1+LE (Liabilities + Equity/ Equity)
equity
c. Interest coverage ratio = EBIT/interest expense (finance cost)
d. Current ratio= Current assets/ Current liabilities
e. Current assets= Cash+ Acc receivable+ Inventory
f. Quick ratio= Acid test ratio= Current assets- Inventory/ Current liabilities

3. Operational ratios (Turnover ki average values)

Assets turnover
= Total sales/ total assets

Inventory turnover 8
= COGS/ Inventory
Days of inventory is stuck=365/8

Receivable turnover 12
= Total sales/Receivable
Receivable number= 365/12== 365 *receivable / Total sales= Receivables/ Daily sales
 Operating cycle= Day of inventory Is stuck+ capital is stuck
Day of inventory Is stuck =Average holding period
capital is stuck= Avg collection period

ROE Return on equity

Return on equity= Total profit/ Total equity

Company A 100 Equity 50 Debt 50 1000

Company B 100 50 150

Total profit/ Total equity= (Total profit/ Total sales)* (Total sales/ Total assets)* (Total assets/equity)

= Profit margin* asset turnover* asset/ equity

ROCE

Total profit/Debt + Equity

Profit margin= Profit/ sales=

0.07= 3500/sales

Total sales Rs 50000

Gross profit= 17000

PBIT= 8000 Interest cover= 8 times= EBIT/interest expense

Interest expense 1000

PBT= 7000

Tax= 3500

PAT=3500

Total assets= total profit/0.035= Rs 100000

Inventory turnover= COGS/inventory= Inventory 16500

Receivable turnover= 360/72= 5 times= total sales/receivable= 10000

Property= 69000

Non current investment= 2400

Inventory= 16500

Trade receivable= 10000

Cash 1500

Other 600

Total assets 100000 = total equity + liabilities

Current ratio= Current assets/ current liabilities

1.3= 28600/ current liabilities

Current liabilities= 22000

Valuation ratios

EPS= Earning per share= Total earning/ number of shares= number of common shares= Total
equity/FV of shares

PE= Price/ Earning= price per share/ Earning per share

PB= Price / book value= price per share/ book value per share

Dividend yield= Face value of a share 10% dividend is on face value

10% of FV 10= 1 rupee/share

Rs 100 /share Rs 150/share

10

Total return 51%

50

51
60

Investor has 51% return, bought at 100 sold at 150 calculate dividend declaration rate

100 has earned 51 rupees of which 50 is part of price appreciation

1 rupper is from dividend yield

Dividend declaration rate would be 1/FV= 10%