Ratios
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Nishi Sir's Ratios Sr #
RATIOS
1
Gross Profit Ratio
2
Net Profit Ratio a) Op Net Profit Ratio
FORMULA
4
5
SUITABILIT Y
To Judge Profitability
Op Net Profit
Percentage % High Ratio
To Judge Profitability
Percentage % High Ratio
To Judge Profitability
X 100
Net sales
Net c) Net Profit After N P A T X 100 Percentage % High Ratio Tax Ratio sales COS + Op Exp X 100 Op Ratio Percentage % Low Ratio Net sales Expense Ratio
Stock T/O Ratio (stock Velocity Ratio) a) Raw Material T/O Ratio b) Work In Progress T/O Ratio
Adm Exp / S&D EXP / Finc exp / Dep Exp X 100
Percentage % Low Ratio
Net sales Total Op Exp Net sales
Percentage % Low Ratio
X 100
COS
Times
High Ratio
Average R M
Times
High Ratio
Average W I P Stock
Times
High Ratio
Average R M Stock Raw Material Consumed
Stock COP
6
Current Ratio
Current Assets Current Liabilities
Pure Ratio (std 2:1)
High Ratio
7
Quick Ratio
Quick Assets Quick Liabilities
Pure Ratio (std 1:1)
High Ratio
8
Stk Working Capital Ratio
9
Properietory Ratio Prop's Funds x 100 Total Assets / Equity Ratio (excl Misc Exp)
10
Debt / Equity Ratio
Debt(Long Term Loans) Equity (Share Holders Funds)
Pure Ratio (std <2:1)
Low Ratio
11
Capital Gearing Ratio
Funds with Fix Interest Funds with Fluctuating Int.
Pure Ratio (std < 1)
Low Ratio
Op Net Profit + Int. x 100 Capital Eployed. (SHF + Long Term Loans)
Percentage % Low Ratio
N.P.B.T. + Interest Total Assets (Ecept Misc. Exp) (Total Resources)
Percentage % High Ratio
Return On 12 Inestent / Capital Employed Return On Total 13 Assets / Total Resoures
Closing Stock Working Capital
x 100
14
Return On Prop. Funds
NPAT +
15
Return On Eq Sh. Holders Funds
NPAT -
Debtors Turn Over Ratio
Net Credit Sales Average Drs & Bills Rec.
16
PURPOSE
Gross Profit X 100 Net Percentage % High Ratio sales
N P B T X 100 b) Net Profit Before Tax Ratio Net sales
3
EXPRESSED AS
Fund
Sh Cap
Interest X 100
Share Holders
Pref. Dividend
Prop Fund - Pref
Percentage % (std Low Ratio <100%) Percentage % (std High Ratio >50%)
Operating Effeciency of Co
To Judge Profitability To know Op cost & Profit To know Op cost & All Operating Profit Expenses To know Op cost & Profit To know Stock Turnover & Management To know Stock Turnover & Management To know Stock Turnover & Cost Of Production Management To know short term Solvency CA-STK-PP EXP CLTo know immediate Solvency (LiquidRatio) BankOD-C.C. To know extent of WC = CA - CL (net WC invested in stock WC) To judge Long Term Solvency & Stability of Co. To judge Long Term Solvency & Stability of Co. To judge Long Term Solvency & Stability of Co. To know overall Pfofitability Earned compared to T.F. To know overall Pfofitability Earned to T.F.
Percentage % High Ratio
% of Profit Earned on Prop Funds
Percentage % High Ratio
% of Profit Earned on Eq Sh H. Fund
Times
Collection From Debtors in Year
High Ratio
Remarks
FA + CA + Invt.
FixInt.=Loans+Pref Sh nonFixInt=EqSh-PrefSh
(Share holders Funds + LongTermLoans) Total Assets = FA+Inv+CA OR SHF + LTL+CL
OpDRS+cl Drs / 2 IF no op DRs given, take Cl Drs
Nishi Sir's Ratios
17
Avg Colletion Period / Age of Drs
Avg Drs & B. R. X 365D Net Credit Sales
Creditors Turn Over Ratio
Net Credit Purhases Average Crs & Bills Pay.
Avg Payent Avg Crs & B. P. X 365D Net Credit Sales Period /Age of Crs Earning Per Share NPAT - Pref Diidend No Of equity Shares (E.P.S.) Price Earning Market Price Of shares 19 E.P.S Ratio (P.E.) 18
20
Dividend PayOut Ratio (D/P Ratio)
a) Total Dividend on & Pref Shares X 100 NPAT b) EQ Dividend Per X 100 EPS
Yield Ratio a) Dividend Yield 21 Ratio b) Earning Yield Ratio Debt Service 22 Coverage Ratio
23
Interest Coverage Ratio
Times
High Ratio
Payments to Creditors in Year
Times
High Ratio
Cr. Period Allowed OR devide by 12 M / by Creditors 52 Weeks
Rs
High Ratio
Times
Low Ratio
Percentage %
it gives dividend and earning % on the MKT Price of the shares; High Ratio also represents the real dividend rate / earning rate
> 1 or < 1
High Ratio
NPBT + Interest Interest
Times
High Ratio
Pref Dividend Coverage Ratio Eq Dividend 29 Coverage Ratio FA to SHFund 30 Ratio
NPAT (before Pref Div) Pref Dividend
31 Debt Assets Ratio
Debt Assets
COS
Sales / COS Capital Employed Sales / COS Working Capital
NPAT - Pref Div EQ Dividend Fixed Assets Share Holders Funds
Net Profit Average Assets or Sales
To Know Profit & Kt Price of Shares Provide guidene for investments
% of NP distributed by way of Dividend High Ratio ~ Liberal Percentage % High Ratio Dividend Policy and Low Ratio ~ Conservative dividend Policy
NPAT+ Dep. & other non cash EXP + Int Interest + Loan Installment p.a.
Sales Average Assets
Return on Assets Ratio
Credit Period OR devide by 12 M / Allowed to Debtors 52 Weeks
MKT Price
27 Assets T/O ratio
32
Short Period
X 100
EPS
Sales / Net FA
28
Share
a) Equity Dividend Per Share X 100 MKT Price
FA Turn Over Ratio Capital Turnover 25 Ratio Working Capital 26 TO Ratio 24
Eq
D/M
To Judge the capacity of Borrower to pay int and Loan Instal To Judge Profit NPBT-TAX& int. = availabvle for NPAT + TAX Int on paying interst and Loans Installment
RATIOS
1
Gross Profit Ratio
2
Net Profit Ratio a) Op Net Profit Ratio
FORMULA
4
5
SUITABILIT Y
To Judge Profitability
Op Net Profit
Percentage % High Ratio
To Judge Profitability
Percentage % High Ratio
To Judge Profitability
X 100
Net sales
Net c) Net Profit After N P A T X 100 Percentage % High Ratio Tax Ratio sales COS + Op Exp X 100 Op Ratio Percentage % Low Ratio Net sales Expense Ratio
Stock T/O Ratio (stock Velocity Ratio) a) Raw Material T/O Ratio b) Work In Progress T/O Ratio
Adm Exp / S&D EXP / Finc exp / Dep Exp X 100
Percentage % Low Ratio
Net sales Total Op Exp Net sales
Percentage % Low Ratio
X 100
COS
Times
High Ratio
Average R M
Times
High Ratio
Average W I P Stock
Times
High Ratio
Average R M Stock Raw Material Consumed
Stock COP
6
Current Ratio
Current Assets Current Liabilities
Pure Ratio (std 2:1)
High Ratio
7
Quick Ratio
Quick Assets Quick Liabilities
Pure Ratio (std 1:1)
High Ratio
8
Stk Working Capital Ratio
9
Properietory Ratio Prop's Funds x 100 Total Assets / Equity Ratio (excl Misc Exp)
10
Debt / Equity Ratio
Debt(Long Term Loans) Equity (Share Holders Funds)
Pure Ratio (std <2:1)
Low Ratio
11
Capital Gearing Ratio
Funds with Fix Interest Funds with Fluctuating Int.
Pure Ratio (std < 1)
Low Ratio
Op Net Profit + Int. x 100 Capital Eployed. (SHF + Long Term Loans)
Percentage % Low Ratio
N.P.B.T. + Interest Total Assets (Ecept Misc. Exp) (Total Resources)
Percentage % High Ratio
Return On 12 Inestent / Capital Employed Return On Total 13 Assets / Total Resoures
Closing Stock Working Capital
x 100
14
Return On Prop. Funds
NPAT +
15
Return On Eq Sh. Holders Funds
NPAT -
Debtors Turn Over Ratio
Net Credit Sales Average Drs & Bills Rec.
16
PURPOSE
Gross Profit X 100 Net Percentage % High Ratio sales
N P B T X 100 b) Net Profit Before Tax Ratio Net sales
3
EXPRESSED AS
Fund
Sh Cap
Interest X 100
Share Holders
Pref. Dividend
Prop Fund - Pref
Percentage % (std Low Ratio <100%) Percentage % (std High Ratio >50%)
Operating Effeciency of Co
To Judge Profitability To know Op cost & Profit To know Op cost & All Operating Profit Expenses To know Op cost & Profit To know Stock Turnover & Management To know Stock Turnover & Management To know Stock Turnover & Cost Of Production Management To know short term Solvency CA-STK-PP EXP CLTo know immediate Solvency (LiquidRatio) BankOD-C.C. To know extent of WC = CA - CL (net WC invested in stock WC) To judge Long Term Solvency & Stability of Co. To judge Long Term Solvency & Stability of Co. To judge Long Term Solvency & Stability of Co. To know overall Pfofitability Earned compared to T.F. To know overall Pfofitability Earned to T.F.
Percentage % High Ratio
% of Profit Earned on Prop Funds
Percentage % High Ratio
% of Profit Earned on Eq Sh H. Fund
Times
Collection From Debtors in Year
High Ratio
Remarks
FA + CA + Invt.
FixInt.=Loans+Pref Sh nonFixInt=EqSh-PrefSh
(Share holders Funds + LongTermLoans) Total Assets = FA+Inv+CA OR SHF + LTL+CL
OpDRS+cl Drs / 2 IF no op DRs given, take Cl Drs
Nishi Sir's Ratios
17
Avg Colletion Period / Age of Drs
Avg Drs & B. R. X 365D Net Credit Sales
Creditors Turn Over Ratio
Net Credit Purhases Average Crs & Bills Pay.
Avg Payent Avg Crs & B. P. X 365D Net Credit Sales Period /Age of Crs Earning Per Share NPAT - Pref Diidend No Of equity Shares (E.P.S.) Price Earning Market Price Of shares 19 E.P.S Ratio (P.E.) 18
20
Dividend PayOut Ratio (D/P Ratio)
a) Total Dividend on & Pref Shares X 100 NPAT b) EQ Dividend Per X 100 EPS
Yield Ratio a) Dividend Yield 21 Ratio b) Earning Yield Ratio Debt Service 22 Coverage Ratio
23
Interest Coverage Ratio
Times
High Ratio
Payments to Creditors in Year
Times
High Ratio
Cr. Period Allowed OR devide by 12 M / by Creditors 52 Weeks
Rs
High Ratio
Times
Low Ratio
Percentage %
it gives dividend and earning % on the MKT Price of the shares; High Ratio also represents the real dividend rate / earning rate
> 1 or < 1
High Ratio
NPBT + Interest Interest
Times
High Ratio
Pref Dividend Coverage Ratio Eq Dividend 29 Coverage Ratio FA to SHFund 30 Ratio
NPAT (before Pref Div) Pref Dividend
31 Debt Assets Ratio
Debt Assets
COS
Sales / COS Capital Employed Sales / COS Working Capital
NPAT - Pref Div EQ Dividend Fixed Assets Share Holders Funds
Net Profit Average Assets or Sales
To Know Profit & Kt Price of Shares Provide guidene for investments
% of NP distributed by way of Dividend High Ratio ~ Liberal Percentage % High Ratio Dividend Policy and Low Ratio ~ Conservative dividend Policy
NPAT+ Dep. & other non cash EXP + Int Interest + Loan Installment p.a.
Sales Average Assets
Return on Assets Ratio
Credit Period OR devide by 12 M / Allowed to Debtors 52 Weeks
MKT Price
27 Assets T/O ratio
32
Short Period
X 100
EPS
Sales / Net FA
28
Share
a) Equity Dividend Per Share X 100 MKT Price
FA Turn Over Ratio Capital Turnover 25 Ratio Working Capital 26 TO Ratio 24
Eq
D/M
To Judge the capacity of Borrower to pay int and Loan Instal To Judge Profit NPBT-TAX& int. = availabvle for NPAT + TAX Int on paying interst and Loans Installment
