Ratio formulas for use in the exercise

Ratios could be expressed as numbers, number of days and e as percentages. Profitability ratios are
expressed in percentage, turnover ratios, liquidity ratios and few equity ratios are expressed in
numbers. Leverage ratios are expressed in proportion, and holding periods like inventory period,
receivables period, operating cycle and the like are expressed in number of days or in months.

Profit margin ratios:

Gross Profit
Gross Profit Margin = x 100
Net Sales

EBITDA
Cash Profit Margin = X 100
Net Sales

EBIT
Operating Profit Margin = X 100
Net Sales

PAT
Net Profit margin = X 100
Net Sales

Return on Investment Ratios:

EBIT
Return on Assets = Average Total Assets X 100

EBIT
Return on Capital Employed=Av L T Capital Employed X 100

Return On Equity = PAT

Average Tangible Net
worth X 100

EBIT Net sales

Return on Assets= Net Sales X Average Total X 100
Assets
Turnover Ratios

Net Sales
Total Assets Turn over =
Average total Assets
Net Sales
Fixed Assets Turn over =
Average Fixed Assets
Net Sales
Current Assets Turn over=
Average Current Assets

Leverage Ratios

Long term Borrowing

Debt Equity Ratio =
Tangible Net worth (Equity)
Total borrowing (ST and LT)
Total Debt to Equity Ratio=
Tangible Net Worth ( Equity)
Current & Non -Current Liabilities
Total Liability to Equity Ratio =
Tangible Net worth ( equity)

Coverage Ratios:

EBITDA -Tax
Interest Cover = Tangible Net worth
(Equity)
EBITDA- Tax
Debt Service Coverage
Ratio Interest + Current portion of long term
loans
Interest + Current portion of long term loans will be equal to interest and amount to be repaid the
current year

Liquidity Ratios

Current Assets
Current Ratio=
Current Liabilities
Current Assets- Inventory
Quick Ratio =
Current Liabilities
Cash and bank Balance
Cash ratio =
Current liabilities

Holding Periods

Average Inventory
Inventory Period=
Cost of Goods sold/365
Creditors ( Payable) Average Trade Creditors ( Payable

2
 period= Cost of Raw Material ( or
purchase)/365
Average Debtors ( Average Receivable
receivable Credit Sales/365

Inventory Ratios can be calculated for raw material (denominator raw material purchased/365),
finished goods (denominator cost of goods sold/365) if average data on these is available and also
annual consumption information is available.

Operating Cycle

Between operating period and the operating cycle the denominator is different. In the case of
operating cycle denominator is net sales

Inventory Period=
Creditors ( Payable) period=
Average Debtors ( receivable) +
Operating Cycle =
Net Operating Cycle=
Average Inventory
Net Sales /365
Average Trade Creditors ( Payable
Net Sales/365
Average Receivable
Net Sales /365
Inventory Period+ Receivable Period
Operating cycle + Creditor Period

Equity Ratios

PAT
Earnings Per Share
Number of shares outstanding
Total Dividend Paid
Dividend Per Share=
Number of shares
DPS
Pay out Ratio =
EPS
Tangible Net Worth
Book Value Per Share=
Number of shares outstanding
Current Market Price per share
P E Ratio=
EPS
Price to Book Value (PB) CMP
ratio= Book Value per share
Tangible Net worth
Book Value Per Share=
Number of shares outstanding

3
Given below are the balance sheet and profit and loss account of MyCO Ltd. Calculate the ratios
of the company and fill-in the blank cells in Ratios of MyCO

Balance Sheet of MyCO Ltd

Rs Crore 2015-16 2014-15
Share capital 296.50 296.50
Reserves 43612.06 33761.37
Net Worth 43908.56 34057.87
Long-term borrowings 26172.91 24530.07
Other long-term liabilities 1197.53 202.59
Current Liabilities and Provisions: 24700.23 19743.87
Short-term borrowings 16275.44 13128.72
Trade creditors 3421.19 2878.81
Other current liabilities 4915.08 2754.75
Provisions 88.52 981.59
Total Capital and Liabilities 95979.23 78534.40
Net Fixed Assets 30679.05 22125.86
Capital work-in progress 13567.15 17422.16
Investments 32461.19 26464.57
Other non-current assets 182.24 5.37
Current assets & Loans and advances: 19089.60 12516.44
Inventory 5026.14 5442.07
Receivables 1429.12 1157.69
Cash and bank balance 642.56 464.14
Loans and advances 11119.98 4500.52
Other current assets 871.80 952.02
Total assets 95979.23 78534.40

Current Portion of Long Term Debt 2856.49 2759.44

Stock Price on Nov 11, 2016 229.6
Face Value 1

4
 Profit and Loss Account of MyCO ltd
2015-16 2014-15
Net sales 29810.62 32502.41
Raw material cost 18339.80 20105.77
Employee cost 603.53 650.13
Power and fuel 4541.65 4534.41
Other Manufacturing Expenses 1235.56 1099.99
Depreciation 1217.97 1011.67
General and Administration Expenses 911.23 925.00
Selling and Distribution Expenses 268.02 236.04
Miscellaneous Expenses 5.01 322.43
Total operating cost 27122.77 28885.44
EBIT 2687.85 3616.97
Interest 3541.36 3655.93
PBT and extraordinary items -853.51 -38.96
Other income/expenses 8823.82 2008.86
Exceptional income/expenses -2490.41 -2.43
PBT 5479.90 1967.47
Tax 8.02 40.27
PAT 5471.88 1927.20
Dividend 1037.75 1215.65

All figures are in Rs. Crore

5
Ratios of MyCO Ltd
Cash Profit Margin
Operating Profit Margin
Net Profit Margin
ROA
ROE
Total assets turnover
Fixed Assets Turnover
Current Assets Turnover
Current Ratio
Debt-Equity
TOL/TNW
Interest Cover
Inventory Period
Receivables Period
Creditors Period
Operating Cycle
Net Operating Cycle
Book value per share
P/B
P/E