Cost Structure & Profitability Ratios

Gross Profit to Sales Gross Profit  Net Sales

Operating Profit to Sales Operating Profit  Net Sales
Effective Tax Rate Income Tax Expenses  Profit Before Taxes
Net Profit Margin Net Profit  Net Sales
Return on Assets Net Profit  Average Total Assets
Return on Equity (assuming Net Profit  Average Equity
there are no preference shares)
= Net Profit Margin
 Total Asset Turnover
 (Average Asset  Average Equity)
Payout Ratio (assuming there Cash Dividend declared per share  Basic EPS
are no preference shares)
= Total Cash Dividend Declared  Net Income
Retention Ratio (assuming 1 – Payout Ratio
there are no preference shares)
= (Net Income – Cash Dividend Declared)  Net Income

Leverage Ratios

Times Interest Earned or EBIT  Interest Expense

Interest Coverage Ratio
Debt Equity Ratio Total Borrowings  Total Equity
Liability to Equity Ratio Total Liability  Total Equity
= (Total Assets  Total Equity) – 1

1
Efficiency or Turnover Ratio
Total Asset Turnover Ratio
Fixed Asset Turnover Ratio
Current Asset Turnover Ratio
Working Capital Turnover Ratio
Accounts Receivable Turnover
Days of Accounts Receivable
Inventory Turnover
Days of Inventory
Accounts Payable Turnover
Days of Accounts Payable
Operating Cycle
Liquidity and Cash Flow Ratios
Current Ratio
Quick Ratio
Cash Cycle
Market based ratios
Price/Earnings Ratio
Dividends Yield
Net Sales  Average Total Assets
Net Sales  Average Fixed Assets
Net Sales  Average Current Assets
Net Sales  Average Working Capital
Net Sales  Average Accounts Receivable
365 days  Accounts Receivable Turnover
= Average A/R  Average Daily Net Sales
Cost of Goods Sold  Average Inventory
365 days  Inventory Turnover
= Average Inventory  Average Daily COGS
Net Purchases  Average Accounts Payable
365 days  Accounts Payable Turnover
= Average A/P  Average Daily Net Purchases
Days of Inventory + Days of Accounts Receivable
Current Assets  Current Liabilities
(Current Assets – Inventory – Prepaid Expenses) 
Current Liabilities
= (Current Investments + Cash & Bank + Trade
Receivable + Short Term Loans & Advances)
 Current Liabilities
Operating Cycle – Days of Accounts Payable
Market Price per share  EPS (basic)
Dividend per Share  Market Price per share