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Ratio

1.) Gross profit ratio: it indicates the efficiency of the production/trading operations.
Formula :
Gross profit
-------------------X100
Net sales
2.) Net profit ratio: it indicates net margin on sales
Formula:
Net profit
--------------- X 100
Net sales
3.) Return on share holders funds: it indicates measures earning power of equity capital.
Formula:
Profits available for Equity shareholders
-----------------------------------------------X 100
Average Equity Shareholders Funds
4.) Earning per Equity share (EPS): it shows the amount of earnings attributable to each
equity share.
Formula:
Profits available for Equity shareholders
---------------------------------------------Number of Equity shares
5.) Dividend yield ratio: it shows the rate of return to shareholders in the form of dividends
based in the market price of the share
Formula:
Dividend per share
---------------------------- X100
Market price per share
6.) Dividend cover Ratio = EPS/Dividend per share
7.) Price earnings ratio: it a measure for determining the value of a share. May also be used to
measure the rate of return expected by investors.
Formula:
Market price of share (MPS)
------------------------------------X 100
Earnings per share (EPS)
8.) Current ratio: it measures short-term debt paying ability.
Current Assets
------------------------

Current Liabilities
9.) Debt-Equity Ratio: it indicates the percentage of funds being financed through borrowings;
a measure of the extent of trading on equity.
Formula:
Total Long-term Debt
--------------------------Shareholders funds
10.)
Fixed Assets ratio: This ratio explains whether the firm has raised adequate longterm funds to meet its fixed assets requirements.
Formula:
Fixed Assets
------------------Long-term Funds
11.)
Quick Ratio: The ratio termed as liquidity ratio. The ratio is ascertained y
comparing the liquid assets to current liabilities.
Formula:
Liquid Assets
-----------------------Current Liabilities
12.) Stock turnover Ratio: The ratio indicates whether investment in inventory in efficiently
used or not. It, therefore explains whether investment in inventory within proper limits or not.
Formula:
cost of goods sold
-----------------------------Average stock
13.)
Debtors Turnover Ratio: The ratio the better it is, since it would indicate that debts
are being collected more promptly. The ration helps in cash budgeting since the flow of cash
from customers can be worked out on the basis of sales.
Formula:
Credit sales
---------------------------Average Accounts Receivable
14.)
Creditors Turnover Ratio: It indicates the speed with which the payments for credit
purchases are made to the creditors.
Formula:
Credit Purchases
----------------------Average Accounts Payable
15.)
Working capital turnover ratio: It is also known as Working Capital Leverage
Ratio. This ratio indicates whether or not working capital has been effectively utilized in
making sales.
Formula:
Net Sales
----------------------------

Working Capital
16.)
Fixed Assets Turnover ratio: This ratio indicates the extent to which the
investments in fixed assets contribute towards sales.
Formula:
Net Sales
-------------------------Fixed Assets
17.)
Pay-outs Ratio: This ratio indicates what proportion of earning per share has been
used for paying dividend.
Formula:
Dividend per Equity Share
--------------------------------------------X100
Earning per Equity share
18.)
Overall Profitability Ratio: It is also called as Return on Investment (ROI) or
Return on Capital Employed (ROCE). It indicates the percentage of return on the total capital
employed in the business.
Formula:
Operating profit
------------------------X 100
Capital employed
The term capital employed has been given different meanings a.sum total of all assets
Whether fixed or current
b.sum total of fixed assets,
c.sum total of long-term funds employed In the business, i.e., share capital +reserves
&surplus +long term loans (non business assets + fictitious assets). Operating profit means profit
before interest and tax
19.)
Fixed Interest Cover ratio: The ratio is very important from the lenders point of
view. It indicates whether the business would earn sufficient profits to pay periodically the
interest charges.
Formula:
Income before interest and Tax
--------------------------------------Interest Charges
20.)
Fixed Dividend Cover ratio: This ratio is important for preference shareholders
entitled to get dividend at a fixed rate in priority to other shareholders.
Formula:
Net Profit after Interest and Tax
-----------------------------------------Preference Dividend

21.)
Debt Service Coverage ratio: This ratio is explained ability of a company to make
payment of principal amounts also on time.
Formula:
Net profit before interest and tax
----------------------------------------------- 1-Tax rate
Interest + Principal payment installment
22.)
Proprietary ratio: It is a variant of debt-equity ratio . It establishes relationship
between the proprietors funds and the total tangible assets.
Formula:

Shareholders funds
-----------------------------Total tangible assets