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Short–term Financial Position or Test of Liquidity |
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(a) Current Ratios |
= Current AssetsCurrent Liabilities |
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(b) Quick or Acid Test or Liquid Ratio |
= Liquid AssetsCurrent Liabilities |
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(c) Absolute Liquid Ratio |
= Absolute Liquid AssetsCurrent Liabilities |
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(d) Interval Measure |
= Liquid AssetsAvg.Daily Operating Expenses |
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Current Assets Movement (Asset Management Ratios) |
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(a) Inventory /Stock Turnover Ratio |
= Cost of Goods SoldAvg.Inventory at Cost |
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(b) Debtors or receivables Turnover Ratio/Velocity |
= Net Credit Annual SaleAvg.Trade Debtors |
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(c) Average Collection Period |
= Total Trade DebtorsSale per Day |
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(d) Creditors / Payable Turnover Ratio / Velocity |
= Net Credit Annual PurchaseAvg.Trade Creditors |
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(e) Average Payment Period |
= Total Trade Creditos / PayableAvg.Daily Purchase |
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(f) Working Capital Turnover Ratio |
= Sales or Cost of SalesNet Working Capital |
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Analysis of Long-term Financial Position or Test of Solvency |
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(a) Debt Equity Ratio |
= Outsiders FundsShareholders′ Funds or = Outsiders′ EquitiesInternal Equities |
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(b) Funded Debt to Total Capitalization Ratio |
= Funded DebtsTotal Capitalization × 100 |
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(c) Ratio of Long term Debt to Shareholders, Funds (Debt Equity) |
= Long term DebtsShareholders′ Funds |
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(d) Proprietary or Equity Ratio |
= Shareholders FundsTotal Assets |
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(e) Solvency Ratio |
= Total Liabilities to OutsidersTotal Assets |
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(f) Fixed Assets Net Worth Ratio |
= Fixed Assets after DepreciationShareholders′ Funds |
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(g) Fixed Assets Ratio or Fixed Assets to Long Term Funds |
= Fixed Assets after DepreciationTotal long term Fund |
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(h) Ratio of Current Assets to Proprietary funds |
= Current AssetsShareholders′ Funds |
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(i) Debt-Service or Interest Coverage |
= Net Profit (before Int. & Taxes)Fixed Interest Charges |
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(j) Total Coverage or Fixed Charge Coverage |
= EBITTotal Fixed Charges |
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(k) Preference Dividend Coverage Ratio |
= Net Profit (before Int.& Tax)Preference Dividend |
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(l) Cash to debt-Service Ratio or Debt Cash Flow Coverage |
= CF 1 + SFD1 − Tax Rate CF = Annual cash flow before Int. & Tax SFD = Sinking fund appropriation on debt |
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Analysis of Profitability |
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(i) General Profitability: |
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(a) Gross Profit Ratio |
= Gross ProfitNet Sale × 100 |
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(b) Operating Ratio |
= Operating CostNet Sale × 100 |
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(c) Expenses Ratio |
= Particular ExpenseNet Sale × 100 |
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(d) Net Profit Ratio |
= Net Profit after TaxNet Sale × 100 |
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(e) Operating Profit Ratio |
= Operating ProfitNet Sale × 100 |
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Overall Profitability |
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(a) Return on Shareholders’ Investment (RoI) |
= Net Profiti after Tax & InterestShareholders′ Fund × 100 |
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(b) Return on Equity Capital |
= Net Profit after Tax − Pref.DividendPaid up Equity Capital × 100 |
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(c) Earnings per Share (EPS) |
= Net Profit after Tax − Pref.DividendNumber of Equity Share × 100 |
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(d) Return on Gross Capital Employed |
= Adjusted Net ProfitGross Capital Employed × 100 |
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(e) Return on Net Capital Employed |
= Adjusted Net ProfitNet Capital Employed × 100 |
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(f) Return on Assets |
= Net Profit after TaxAvg.Total Assets × 100 |
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(g) Capital Turnover Ratio |
= Sale or Cost of SaleCapital Employed × 100 |
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(h) Fixed Assets Turnover Ratio |
= Sale or Cost of Goods SoldFixed Assets × 100 |
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(i) Working Capital Turnover Ratio |
= Sale or Cost of Goods SoldNet Working Capital × 100 |
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Market Test or Valuation Ratio |
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(a) Dividend Yield Ratio |
= Dividend per ShareMarket Value per Share |
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(b) Dividend Payout Ratio |
= Dividend per Equity ShareEarnings per Share |
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(c) Price/Earnings (P/E) Ratio |
= Market Price per Equity ShareEarnings per Share |
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(d) Earning Yield Ratio |
= Earnings per ShareMarket price per share |
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(e) Market Value Book Value Ratio |
= Market value per shareBook value per share |
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(f) Market Price to Cash Flow Ratio |
= Market price per shareCash flow per share |
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Market Test or Valuation Ratio |
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(a) Capital Gearing Ratio |
= Equity Share Capital + Reserve & SurplusPref.Capital + Long term Debt bearing Fixed Interest |
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(b) Total Investment to Long Term Liabilities |
= Shareholders Fund + Long term LiabilitiesLong term Liabilities |
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(c) Debt Equity Ratio |
= Outsiders FundsShareholders Funds |
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(d) Ratio to Fixed Assets to Funded Debt |
= Fixed AssetsFunded Debts |
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(e) Ratio of Current Liabilities to Proprietors fund |
= Current LiabilitiesShareholders′ Funds |
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(f) Ratio of Reserve to Equity Capital |
= ReservesEquity Share Capital × 100 |
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(g) Financial Leverage |
= EBITEBIT − Interest & Pref.Dividend |
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(h) Operating Leverage |
= ContributionEBIT |