TYPES OF RATIOS

1. CURRENT RATIOS 2 RATIOS

2. SOLVENCY RATIOS 4 RATIOS CHAPTER -4
3. ACTIVITY/ TURNOVER RATIOS 4 RATIOS
4. PROFITABILITY RATIOS 5 RATIOS 15
ACCOUNTING RATIOS( FORMULAE)
CAPIATAL EMPLOYED

LIABILITIES ASSETS
I. SHAREHOLDERS' FUNDS I. NON-CURRENT ASSETS
SHARE CAPITAL TANGIBLE ASSETS

TOTAL LIABILITIES
RESERVES AND SURPLUS INTANGIBLE ASSETS

TOTAL ASSETS
II. NON CURRENT LIABILITIES II. CURRENT ASSETS
TOTAL DEBT

BANK LOAN TRADE RECEIVABLE

% DEBENTURES
III. CURRENT LIABILITIES
TRADE PAYABLES
SHORT TERM BORROWINGS
OTHER CURRENT LIABILITIES
INVENTORIES
CASH & CASH EQUIVALENTS
OTHER CURRENT ASSETS

SUB FORMULAE
SHAREHOLDERS' FUNDS= EQUITY CAPITAL +PREFERENCE CAPITAL+ RESERVES & SURPLUS

TOTAL DEBT= NON CURRENT LIABILITIES+CURRENT LIABILTIES

CAPITAL EMPLOYED = SHAREHOLDERS' FUNDS+ NON CURRENT LIABILITIES( LONG TERM DEBT)

WORKING CAPITAL= CURRENT ASSETS - CURRENT LIABILITIES

WORKING CAPITAL = CAPITAL EMPLOYED - FIXED ASSETS

QUICK ASSETS = CURRENT ASSETS - (INVENTORIES+ PREPAID EXPENSES + ACCRUED INCOME)

COST OF REVENUE FROM OPERATIONS(COGS) = REVENUE FROM OPERATIONS - GROSS PROFT

COGS = OPENING INVENTORY + PURCHASES + DIRECT EXPENSES - CLOSING INVENTORY

OPERATING COST = COGS + OPERATING EXPENSES

OPERATING EXPENSES = ADMINISTRATION/ SELLING & DISTRIBUTION, DEPRECIATION & AMORTIZATION EXPENSES

OPERATING PROFIT = REVENUE FROM OPERATIONS - OPERATING COST

OPERATING PROFIT = GROSS PROFIT - OPERATING EXPENSES

NET PROFIT = OPERATING PROFIT + NON OPERATING INCOME - NON OPERATING EXPENSES

PROFIT BEFORE INTEREST AND TAX = PROFIT AFTER TAX + TAX + INTEREST

1. CURRENT RATIOS:
1. CURRENT RATIOS: ( PURE RATIO)
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺
A) CURRENT RATIO =
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺

𝑸𝑼𝑰𝑪𝑲 𝑨𝑺𝑺𝑬𝑻𝑺
B) QUICK RATIO =
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺

2. SOLVENCY RATIOS: ( PURE RATIO)

𝑳𝑶𝑵𝑮 𝑻𝑬𝑹𝑴 𝑫𝑬𝑩𝑻
A) DEBT-EQUITY RATIO =
𝑺𝑯𝑨𝑹𝑬𝑯𝑶𝑳𝑫𝑬𝑹𝑺′ 𝑭𝑼𝑵𝑫𝑺

𝑺𝑯𝑨𝑹𝑬𝑯𝑶𝑳𝑫𝑬𝑹𝑺′ 𝑭𝑼𝑵𝑫𝑺
B) PROPRIETARY RATIO =
𝑻𝑶𝑻𝑨𝑳 𝑨𝑺𝑺𝑬𝑻𝑺

𝑻𝑶𝑻𝑨𝑳 𝑨𝑺𝑺𝑬𝑻𝑺
C) TOTAL ASSETS TO DEBT RATIO =
𝑳𝑶𝑵𝑮 𝑻𝑬𝑹𝑴 𝑫𝑬𝑩𝑻

𝑷𝑹𝑶𝑭𝑰𝑻 𝑩𝑬𝑭𝑶𝑹𝑬 𝑰𝑵𝑻𝑬𝑹𝑬𝑺𝑻 𝑨𝑵𝑫 𝑻𝑨𝑿

D) INTEREST COVERAGE RATIO =
𝑰𝑵𝑬𝑹𝑬𝑺𝑻 𝑶𝑵 𝑳𝑶𝑵𝑮 𝑻𝑬𝑹𝑴 𝑫𝑬𝑩𝑻

3. ACTIVITY RATIOS: ( TIME RATIO)

𝑪𝑶𝑺𝑻 𝑶𝑭 𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺
A) INVENTORY TURNOVER RATIO =
𝑨𝑽𝑮.𝑰𝑵𝑽𝑬𝑵𝑻𝑶𝑹𝒀

𝑪𝑹𝑬𝑫𝑰𝑻 𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺

B) TRADE RECEIVABLE TURNOVER RATIO =
𝑨𝑽𝑮.𝑻𝑹𝑨𝑫𝑬 𝑹𝑬𝑪𝑬𝑰𝑽𝑨𝑩𝑳𝑬𝑺

𝑪𝑹𝑬𝑫𝑰𝑻 𝑷𝑼𝑹𝑪𝑯𝑨𝑺𝑬𝑺
C) TRADE PAYABLE TURNOVER RATIO =
𝑨𝑽𝑮.𝑻𝑹𝑨𝑫𝑬 𝑷𝑨𝒀𝑨𝑩𝑳𝑬𝑺

𝑪𝑶𝑺𝑻 𝑶𝑭 𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺

D) WORKING CAPITAL TURNOVER RATIO =
𝑾𝑶𝑹𝑲𝑰𝑵𝑮 𝑪𝑨𝑷𝑰𝑻𝑨𝑳

4. PROFITABILITY RATIOS: (PERCENTAGE)

𝑮𝑹𝑶𝑺𝑺 𝑷𝑹𝑶𝑭𝑰𝑻
A) GROSS PROFIT RATIO =
𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺

𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑵𝑮 𝑪𝑶𝑺𝑻
B) OPERATING RATIO =
𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺

𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑵𝑮 𝑷𝑹𝑶𝑭𝑰𝑻
C) OPERATING PROFIT RATIO =
𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺

𝑵𝑬𝑻 𝑷𝑹𝑶𝑭𝑰𝑻
D) NET PROFIT RATIO =
𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑭𝑹𝑶𝑴 𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑶𝑵𝑺

𝑷𝑹𝑶𝑭𝑰𝑻 𝑩𝑬𝑭𝑶𝑹𝑬 𝑰𝑵𝑬𝑹𝑬𝑺𝑻 𝑨𝑵𝑫 𝑻𝑨𝑿

E) RETURN ON INVESTMENT( ROI) =
𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑬𝑴𝑷𝑳𝑶𝒀𝑬𝑫