Ratios

Ratios: 

Ratios

A. Liquidity Ratios : 

A. Liquidity Ratios 1. Current Ratio/Working Capital Ratio:- Current Ratio = Current Assest/Current liabilities #C.A= Cash in hand+cash at bank + B/R+short term investment+securities+Debtors(Debtors-Provision)+Stock+prepaid Exp. #C.L= Bank Overdraft+B/P+Creditors+provision for taxation+proposed/unclaimed Dividend+O/S Exp. + Loan within a year

Slide 3: 

2.Quick/Acid test Ratio=liquid assets/C.Liabilities #Liquid Assests = Current Assest- Stock - prepaid Exp

B. Solvency Ratios: 

B. Solvency Ratios Debt Equity Ratio= Debt/Equity #Debt=Long term Loans+Debentures+All Loans+public deposits #Equity=Equity share Capital+All shares+Securities premium+All Reserve+credit bal. of P/L A/C 2.Total Assest to Debt Ratio=Total Assest/Debt 3. Proprietary Ratio= Equity/Total Assets

C. Activity/Turnover Ratio : 

C. Activity/Turnover Ratio Inventory/Stock Turnover Ratio :- Cost of Goods Sold / Average Stock #Cost of Good Sold= Opening Stock+Purchase+carriage+Wages+Carriage+ Other Direct Charges-Closing Stock OR, Net Sales – Gross Profit #Average Stock = Opening Stock+Closing Stock/2

Slide 6: 

2. Debtors turnover Ratio/Receivables Turnover Ratio :- Debtors Turnover Ratio= Net Credit Sales/Average Debtors+ Average B/R #Net Credit Sales= Total Sales- Cash Sales #Average Debtors= OpeningDebtors+Closing Debtors+B/R/2 *Average Collection Period = 365/Debtors Turnover Ratio

Slide 7: 

3. Creditor/Payable Turnover Ratio = Net Credit Purchases/Average Creditor+Average B/P #Net Credit Purchase = Total purchase - Cash Purchase #Average Creditor+Average B/P = Opening Creditor+Closing Creditor+B/P/2 * Average Payment Period =365/CreditorTurnover Ratio

Slide 8: 

4.Working Capital Turnover Ratio = Cost of good sold/Working Capital # Cost of Good Sold= Opening Stock+Purchase+carriage+Wages+Other Direct Charges-Closing Stock OR, Net Sales – Gross Profit #Working Capital = Current Assets – Current Liabilities

D. Income / Profit Ability Ratio : 

D. Income / Profit Ability Ratio 1.Gross Profit Ratio= Gross Profit/Net Sales *100 # Net Sales = Sales – Sales Return #Gross Profit = Net Sales – Cost Of Good Sold 2. Operating Ratio :- Cost Of Good Sold + Operating Exp./Net Sales *100 #Operating Exp. = Office & Administration Exp. + Selling And Distribution Exp + Depreciation + Discount +Bad Debts+Intersest On Short Term loans #Cost Of Good Sold= Opening Stock + Purchase +Direct Exp.+Carriage + Wages- closing Stock