Current Ratio = Current Assets Current Liabilities

Current Ratio: The current ratio is obtained by dividing total current assets by total current liability. The current ratio is calculated to determine liquidity or solvency position of the company. It indicates whether company is capable to discharge its current liability. Current Ratio

=

Current Assets Current Liabilities

Quick Ratio: The quick ratio is calculated by dividing the total current assets less inventories by the total current liabilities. It is modified version of current ratio. It indicates the ability of a company to pay its current liabilities out of immediately convertible current assets into cash. Quick Ratio= Inventories

Current Assets Current Liabilities

Total Debt to Total Assets Ratio: This ratio is obtained by dividing total debt by the total assets and represent the proportion of assets that is financed by debt. TD to TA Ratio=

Total Debt Total Assets

Time Interest Earned: The time interest earned ratio is obtained by dividing the operating income by the interest expense. The time interest earned ratio provides a measure of the extent to which the firm is capable of servicing its interest expense from funds available from operation. Time Interest Earned = Operating Income Interest Expenses

Gross Profit Rate: This rate is calculated by dividing gross profit by net sales. In evaluating the performance of company it is useful to express the gross profit rate. A rising gross profit rate usually mean that demand for company’s product is strong enough and the company is able to increase its sales prices. Gross Profit Rate=

Gross Profit Net Sales

Inventory Turnover: This ratio is calculated by dividing the net sales by the inventory and is measure of effective inventory management policies. It indicates how many times the average inventory is sold during the course of the year. This computation is of interest to short term creditors/owners because it indicates the relative liquidity of the companies inventory how quickly this asset can be sold. Inventory Turnover=

Net Sales Inventory

Receivable turnover: The account receivable turnover ratio tells us how many times the receivable were converted into cash during the year. The ratio is computed by dividing annual net sales by average account receivables. Receivable Turnover= Annual Net Sales Avg. A/c. R’able

Net Profit Margin: The profit margin reflects managerial efforts at controlling costs, the market’s acceptance of the firm’s products, the effectiveness of its marketing and sales efforts and the firm’s over all efficiency and profitability. The ratio is given as follows. Net Profit Margin=

Net Profit Net Sales

Price to Earning Ratio: This indicates a relationship b/w the market price of common stock and earning per share. It is expressed as ratio and also called the price earning ratio of P/E. This P/E is determined by dividing the market price per share by the annual earning per share. The outlook for future earning is the major factory influencing a company’s P/E ratio. The P/E ratio is as follows. Price to Earning Ratio=

Price per Share Earning per Share*

*Earning per Share is also calculated by dividing Net Income by total No. of Stocks.

Average Collection Period: The average collection period is calculated by dividing receivable by sales per day. This ratio indicates the firm’s credit policies and aggressiveness in collecting receivable. The average collection period should be closed to the sales terms granted by the firm, generally firms in the same industry have similar terms. It is calculated as follows. Avg. Collection Period =

Receivable x 360 Net Sales

Break up Value of Share: This value is arrived at by dividing total equity by number of shares. It indicates the worth of a share as per paid-up capital plus reserves unappropriated profit o/s. at the date of Balance Sheet. Break-up Value of Shares= Equity Shares

Total Shares Holder Number of

Total Assets Turnover: The Total Assets Turnover is a measure of the Firm’s over all effectiveness in utilizing its assets in generating sales. This is determined by dividing sales by total assets. Total Assets Turnover = Net Sales Total Assets

Balance Sheet Assets Cash 7.4 Short-term Inv. 1.2 A/c. R’able 43.6 Inventories 112.9 T.Current Assets 165.1 Land 3.7 Building & Equipment 171.5 Accumulated Dep. (58.4) Total Fixed Assets 116.8 Subsidiary Invest. 11.3 Total Assets 293.2

Liabilities & Equity A/c. P’ble Notes P’ble-8% Tax P’ble

45.2 3.5 12.7 T.Current Liability 61.4 Mortgage bonds-7% 30.00 TFC – 8% 40.00 Total Other Liabilities 70.00 131.4 Stock @ 2/Share 21.4 Retained Earning 140.4 Total Equity 161.8 Total Liability & Equity 293.2

* Market Price / Share = 32.5 * Dividend / Share = 1.10

Income Statement: Net Sales (-)Cost of Goods Sold Gross Income (-) Selling and Operating. Expenses (-) Depreciation 7.8 . Operating Income (-) Interest Income before Tax (-) Income tax @ 46% 24.7 . Net Income Common Dividend Marginal Increase in Retained Earning 17.23

390.2 284.3 105.9 38.8

59.3 5.6 . 53.7

29.00 11.77 .

End of Presentation

Thanks M. Adil Siddiqui 0300-2019801 E-mail ([email protected])