FINANCIAL RATIOS

i) Current Ratio
Also known as "liquidity ratio", "cash asset ratio" and "cash ratio". Current Ratio =Current Assets/Current Liabilities

ii) Liquid (Acid Test) Ratio

A stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Also known as quick ratio (Current Assets Inventory) / Current liabilities

iii) Cash Ratio

The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. Also called cash asset ratio Cash ratio = Cash and cash equivalents / Current Liabilities

iv) Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Also known as financial leverage Debt-to-equity ratio = Liabilities / Equity

v) Interest Coverage Ratio

A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period Interest coverage ratio = EBIT / Interest expenses

vi) Fixed Charges Coverage Ratio

Indicates a firms ability to satisfy fixed financing expenses such as interest and leases. This means that the fixed charges that a firm is obligated to meet are met by the firm. This ratio is calculated by summing up Earnings before interest and Taxes or EBIT and Fixed charge which is divided by fixed charge before tax and interest. (EBIT + Fixed charge before tax) / (Fixed charge before tax + Interest)

vii) Inventory Turnover Ratio

A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days." Inventory Turnover =Cost of Goods Sold/Average Inventory

viii) Debtors Turnover Ratio

Accounts receivable turnover is the ratio of net credit sales of a business to its average accounts receivable during a given period, usually a year. Receivables Turnover=Net Credit Sales/Average Accounts Receivable

ix) Average Collection Period (assume 365 days in a year)

The approximate amount of time that it takes for a business to receive payments owed, in terms of receivables, from its customers and clients. Calculated as:

x) Fixed Assets Turnover

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. Fixed Asset Turnover Ratio = Sales Revenue / Total Fixed Assets

xi) Total Assets Turnover Ratio

Asset turnover ratio is the ratio of a company's sales to its assets. It is an efficiency ratio which tells how successfully the company is using its assets to generate revenue. There are a number of variants of the ratio like total asset turnover ratio, fixed asset turnover ratio and working capital turnover ratio. In all cases the numerator is the same i.e. net sales (both cash and credit) but denominator is average total assets, average fixed assets and average working capital respectively. Following formulas are used to calculate each of the asset turnover ratios: Net Sales Total Asset Turnover Average Total Ratio = Assets Net Sales Fixed Asset Average Fixed Turnover Ratio = Assets Net Sales Working Capital Average Net Turnover Ratio = Working Capital

xii) Gross Profit Margin

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold.

Calculated as:

xiii) Net Profit Margin

A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Net profit margin = Profit (after tax) / Revenue

xiv) Return on Assets

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment" ROA = Net Income after tax / Total assets (or Average Total assets)

xv) Earning Power

A business's ability to generate profit from conducting its operations. Earnings power is used to analyze stocks to assess whether the underlying company is worthy of investment. Basic Earning Power = Earnings Before Interest and Taxes (EBIT) Total Assets

xvi) Return on Equity

The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE = Net income after tax / Shareholder's equity

xvii) DuPont Equation

DuPont formula (also known as the DuPont analysis, DuPont Model, DuPont equation or the DuPont method) is a method for assessing a company's return on equity (ROE) breaking its into three parts. The name comes from the DuPont Corporation that started using this formula in the 1920s. ROE (DuPont formula) = (Net profit / Revenue) * (Revenue / Total assets) * (Total assets / Equity) = Net profit margin * Asset Turnover * Financial Leverage

xviii) Earning Per Share

Earnings per Share (EPS) of a business is the portion of its net income of a period that can be attributed to each share of its common stock. Earnings per share can be calculated by dividing net income of a period by the number of common shares outstanding during the period. Earnings per Share (EPS) = (Net Income Dividends on Preferred Shares)/Weighted Average Number of Common Shares Outstanding

xix) Dividend Per Share

The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued.

DPS can be calculated by using the following formula:

D - Sum of dividends over a period (usually 1 year) SD - Special, one time dividends S - Shares outstanding for the period

xx) Book Value Per Share

The book value per share formula is used to calculate the per share value of a company based on its equity available to shareholders. The term "book value" is a company's assets minus its liabilities and is sometimes referred to as stockholder's equity, owner's equity, shareholder's equity, or simply equity. Stockholder's equity, or owner's equity, can be found on the balance sheet for the company.

xxi) Total Market Value added

A calculation that shows the difference between the market value of a company and the capital contributed by investors (both bondholders and shareholders). In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity. Calculated as:

What is the difference between economic value added and market value added? http://www.investopedia.com/ask/answers/06/economicvsmarketvalueadded.asp

xxii) Price/Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings. Market Value per Share/Earnings per Share (EPS)