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TYPES OF RATIOS

TYPES OF RATIOS. Liquidity ratios. LEVERAGE/CAPITAL RATIOS. ACTIVITY RATIOS. PROFITABILITY RATIOS. LIQUIDITY RATIOS. CURRENT RATIO {CURRENT ASSETS:CURRENT LIABILTIES}. ACID TEST/QUICK RATIO {( CURRENT ASSETS-INVENTORIES):CURRENT LIABILTIES}. CASH/ABSOLUTE LIQUIDITY RATIO

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TYPES OF RATIOS

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  1. TYPES OF RATIOS Liquidity ratios LEVERAGE/CAPITAL RATIOS ACTIVITY RATIOS PROFITABILITY RATIOS

  2. LIQUIDITY RATIOS CURRENT RATIO {CURRENT ASSETS:CURRENT LIABILTIES} ACID TEST/QUICK RATIO {(CURRENT ASSETS-INVENTORIES):CURRENT LIABILTIES} CASH/ABSOLUTE LIQUIDITY RATIO {(CASH+MARKETABLE SECURITIES):CURRENT LIABILITIES} BASIC DEFENSE INTERVAL {(CASH+RECEIVABLES+MARKETABLE SECURITIES):[(OPERATING EXPENSES+INTEREST+INCOME TAXES)/365]} NET WORKING CAPITAL RATIO [Current Assets - Current Liabilities (excluding short-term bank borrowing)]

  3. CAPITAL STRUCTURE/LEVERAGE RATIOS CAPITAL STRUCTURE RATIOS COVERAGE RATIOS DEBT SERVICE COVERAGE RATIO [EARNINGS AVAILABLE FOR DEBT SERVICE:(INTEREST+INSTALLMENTS)] EQUITY RATIO (SHAREHOLDER’S EQUITY:TOTAL CAPITAL EMPLOYED) INTEREST COVERAGE RATIO (EBIT:INTEREST) PREFERENCE DIVIDEND COVERAGE RATIO (EAT:PREFERENCE DIVIDEND LIABILITY) DEBT RATIO (TOTAL DEBT:CAPITAL EMPLOYED) CAPITAL GEARING RATIO [(PREF SHARE CAPT+DEBEN+LONG TERM LOANS):(EQUITY SH CAP+RESERVES&SURPLUS-LOSSES)] DEBT TO EQUITY RATIO (TOTAL LIABILITIES:SHAREHOLDER’S EQUITY) (FIXED ASSESTS:LONG TERM FUNDS) PROPRIETORY RATIO (PROPRIETORY FUND:TOTAL ASSETS)

  4. ACTIVITY RATIOS CAPITAL TURNOVER RATIO (SALES:CAPITAL EMPLOYED) FIXED ASSETS TURNOVER RATIO (SALES:CAPITAL ASSETS) WORKING CAPITAL TURNOVER RATIO (SALES:WORKING CAPITAL) CREDITORS TURNOVER RATIO (CREDIT PURCHASES:AVERAGE A/CS PAYABLE) INVENTORY TURNOVER RATIO (SALES:AVERAGE INVENTORY) OR (COST OF SALES:AVERAGE STOCK) AS WELL AS (RAW MATERIAL CONSUMED:AVERAGE R.M STOCK) IN CASE OF RAW MATERIALS DEBTORS TURNOVER RATIO (CREDIT SALES:AVERAGE ACCOUNTS RECEIVABLE) AVERAGE COLLECTION PERIOD (AVERAGE A/CS RECIEVABLE:AVERAGE DAILY CREDIT SALES) AVERAGE CREDIT SALES (CREDIT SALES:365) AVERAGE PAYMENT PERIOD (AVERAGE A/CS PAYABLE:AVERAGE DAILY CREDIT PURCHASES) AVERAGE CREDIT PURCHASES (CREDIT PURCHASES:365)

  5. PROFITABILITY RATIOS BASED ON REQUIREMENT FOR ANALYSIS FROM OWNERS POINT OF VIEW BASED ON ASSETS/ INVESTMENTS BASED ON SALES OF THE FIRM BASED ON CAPITAL MARKET INFORMATION

  6. PROFITABILITY RATIOS REQUIRED FOR ANALYSIS FROM OWNERS POINT OF VIEW RETURN OF EQUITY (PROFIT AFTER TAX:NET WORTH) EARNINGS PER SHARE (NET PROFIT AVAILABLE TO EQUITY SHAREHOLDERS:NO,OF ORDINARY SHARES OUTSTANDING DIVIDEND PER SHARE (TOTAL PROFITS DISTRIBUTED TO EQ. SHAREHOLDERS:NO, OF EQ. SHARES) PRICE EARNING RATIO (MARKET PRICE PER SHARE:EARNINGS PER SHARE) COMPOSITION OF RETURN OF EQUITY UNDER Du-Pont MODEL (NET PROFIT MARGIN)(ASSET TURNOVER) (EQUITY MULTIPLIER) NET PROFIR MARGIN (NET INCOME:REVENUE) EQUITY MULTIPLIER (ASSETS:SHAREHOLDER’S EQUITY) ASSET TURNOVER (REVENUE:ASSETS)

  7. PROFITABILITY RATIOS BASED ON ASSETS/INVESTMENTS RETURN ON CAPITAL EMPLOYED [(RETURN:CAPITAL EMPLOYED)*100] RETURN ON INVESTMENT [(RETURN:CAPITAL EMPLOYED)*100] OR (PROFITABILITY RATIO)(CAPITAL TURNOVER RATIO) RETURN ON ASSETS (NET PROFIT AFTER TAXES:AVERAGE TOTAL ASSETS) OR (NET PROFIT AFTER TAXES:AVERAGE TANGIBLE/FIXED ASSETS) PROFITABILITY RATIO [(RETURN:SALES)*100] CAPITAL TURNOVER RATIO (SALES:CAPITAL EMPLOYED)

  8. PROFITABILITY RATIOS BASED ON SALES OF FIRM GROSS PROFIT RATIO [(GROSS PROFIT:SALES)*100] OPERATING PROFIT RATIO [(OPERATING PROFIT:SALES)*100] NET PROFIT RATIO [(NET PROFIT:SALES)*100] P/V RATIO {[(SALES-VARIABLE COST):SALES]*100} OPERATING PROFIT (SALES-COST OF SALES)

  9. PROFITABILITY RATIOS BASED ON CAPITAL MARKET INFORMATION PRICE-EARNING RATIO (AVERAGE SHARE PRICE:EPS) OR (CLOSING SHARE PRICE:EPS) YIELD [(DIVIDEND:AVERAGE SHARE PRICE)*100] OR [(DIVIDEND:CLOSING SHARE PRICE)*100] (MARKET VALUE PER SHARE)/(BOOK VALUE PER SHARE) [AVERAGE SHARE PRICE:(NET WORTH/NO, OF EQ. SHARES)] OR [CLOSING SHARE PRICE:(NET WORTH/NO, OF EQ. SHARES)]

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