(1) Gross Profit Ratio = Gross Profit X 100

Net Sales

Gross Profit = Net Sales Cost of Goods Sold

Net Sales = Total Sales Sales Return
Total Sales = Cash Sales + Credit Sales
Cost of Goods Sold = Opening Stock + Purchases + Direct
Expenses Purchase Return Closing Stock

(2) Net Profit Ratio = Net Profit X 100

Net Sales

Net Profit = Gross Profit Operating Expenses + Non-Operating Incomes Non

Operating Expenses

Operating Expenses = (SODA) Selling Expenses + Office Expenses

+ Distribution Expenses + Administrative Expenses

(3) Operating Profit Ratio = Operating Profit X 100

Net Sales

Operating Profit = Gross Profit Operating Expenses

OR
Operating Profit = Net Profit + Non Operating Expenses Non Operating Income

(4) Operating Ratio = Operating Cost X 100

Net Sales

Operating Cost = Cost of Goods Sold + Operating Expenses

(6) Return on Investment (ROI) = Profit before Interest, Tax & Dividend X 100
Capital Employed

Where, Profit before interest, Tax & Dividend = Profit After Tax + Interest + Tax
= Profit after Interest + Interest

Capital Employed = Share Capital (Equity + Preference)

+ Reserves + Surplus/Profit & Loss A/c (Cr.)/Accumulated Profits
+ Debentures + Long term loans [Preliminary Expenses
 Discount/Commission or Issue of Share / Debenture Profit
& Loss A/c (Dr. Balance)]

ALTERNATIVELY
Capital Employed = Net Fixed Assets + Long Term Investments +
Working Capital
Net Fixed Assets = Total Fixed Assets Depreciation
Working Capital = Current Assets Current Liabilities

(7) (a)
Return on Shareholder's Funds = Profit after Interest & Tax but before Dividend X 100
Equity or Shareholder's Funds

Equity or Shareholders' Fund = Share Capital (Equity + Preference) + Reserve

+ Surplus / Profit & Loss A/c (Cr. Balance) or accumulated profits
Preliminary Expenses Discount/Commission on Issue of
Share Debentures Profit & Loss A/c (Dr. Balance) or
Accumulated Losses

Profit after Interest, Tax but before Preference Dividend

= Profit after Tax Preference Dividend
= Profit after Interest Tax Preference Dividend
= Profit before Interest Interest Tax Preference Dividend

(7) (b) Return on Equity (ROE)

= Profit after interest, Tax & Pref. Dividend X 100
Equity Shareholder's Funds

Equity shareholder's Fund = Equity Share Capital + Reserve + Surplus / Profit & Loss A/c
(Cr. Balance) or accumulated profits Preliminary Expenses Discount
/ commission on issue of Share Debentures Profit & Loss A/c
(Dr. Balance) or Accumulated Losses

(8) Interest coverage (Debt Service) Ratio = Profit before Interest, Tax & Dividend
Interest on Debentures & Loans

(9) Current Ratio = Current Assets

Current Liabilities
Current Assets = Cash in Hand + Cash at Bank + Bills Receivable
+ Sundry Debtors + Marketable Securities or Short
term investments + Loans & Advances + Stock / Inventories
+ Prepaid Expenses + Accrued Incomes

Current Liabilities = Sundry Creditors + Bills Payable + Provision for

Bad Debts + Provision for Taxation + Bank Overdraft
+ Outstanding Expenses + Income received in Advance
+ Short term Loans

(10) Liquid Ratio / Quick Ratio / Acid Test Ratio

= Liquid Assets or Quick Assets
Current Liabilities

Liquid Assets = Current Assets Closing Stock Prepaid Expenses

(11) Stock Turnover Ratio (STR) = Cost of Goods Sold

Average Stock

Average Stock = (Opening Stock + Closing Stock)

(12) Debtors Turnover Ratio (DTR) = Net Credit Sales in a year

Average Accounts Receivable

Average A/c Receivable = (Opening A/c Receivable + Closing A/c Receivable)

Accounts Receivable = Debtors + B/R
OR
Account Receivable = Opening Debtor + Opening B/R + Closing Debtors + Closing B/R
2

(13) Average Debt Collection Period = Days or Months in a year

Debtors Turnover Ratio

Alternatively, Average Debt Collection Period

= Days or Months in a year X Accounts Receivable in a year
Net Credit Sales in a year

(14) Creditors Turnover Ratio (CTR) = Net Credit Purchases

Average Accounts Payable
 Average A/c Payable = (Opening A/c Payable + closing A/c Payable)
Accounts Payable = Creditors + B/P

(15) Average Payment Period = Days or Months in a year

Creditors Turnover Ratio

Alternatively, Average Payment Period = Days or Months in a year X Accounts Payable in a year
Net Credit Purchases in a year

(16) Capital Turnover Ratio = Net Sales

Capital Employed

(17) Fixed Assets Turnover Ratio = Net Sales

Net Fixed Assets

Net Fixed Assets = Gross Fixed Assets - Depreciation

(18) Working Capital Turnover Ratio = Net Sales

Working Capital

Working Capital = current Assets Current Liabilities

(19) Assets Turnover Ratio = Net Sales

Total Assets

Total Assets = Fixed Assets + Long Term Investment Current Assets

(20) Debt-Equity Ratio = Long term Debt or Loans

Equity or Shareholders' Funds

Long term Debts = Debentures + Loans or Mortgage

OR Long Term Debts = Total Debts Current Liabilities

(21) Debt Total Fund Ratio = Long Term Debts

Total Long Term Funds

Total Funds Term Fund = shareholder's Funds + Long Term Debts

(22) Proprietary Ratio = Shareholder's Funds or Proprietor's Fund

Total Assets
 Shareholder's Funds = Share Capital (Equity + Preference)
+ Reserves + Surplus/Accumulated Profit or P/L
A/c(Cr) - Preliminary Expenses
Discount on issue of Shares/Debentures
P/L A/c (Dr.)
SUMMARY
Liquidity Ratios

S. No. RATIOS FORMULAS

1 Current Ratio Current Assets/Current Liabilities

2 Quick Ratio Liquid Assets/Current Liabilities

3 Absolute Liquid Ratio Absolute Liquid Assets/Current Liabilities

Profitability Ratios

S. RATIOS FORMULAS
No.

1 Gross Profit Ratio Gross Profit/Net Sales X 100

2 Operating Cost Ratio Operating Cost/Net Sales X 100

3 Operating Profit ratio Operating Profit/Net Sales X 100

4 Net Profit Ratio Operating Profit/Net Sales X 100

5 Return on Investment Ratio Net Profit After Interest And Taxes/ Shareholders Funds or Investments X
100

6 Return on Capital Employed Net Profit after Taxes/ Gross Capital Employed X 100
Ratio

7 Earnings Per Share Ratio Net Profit After Tax & Preference Dividend /No of Equity Shares

8 Dividend Pay Out Ratio Dividend Per Equity Share/Earning Per Equity Share X 100

9 Earning Per Equity Share Net Profit after Tax & Preference Dividend / No. of Equity Share

10 Dividend Yield Ratio Dividend Per Share/ Market Value Per Share X 100

11 Price Earnings Ratio Market Price Per Share Equity Share/ Earning Per Share X 100
12 Net Profit to Net Worth Ratio Net Profit after Taxes / Shareholders Net Worth X 100

Working Capital Ratios

S. No. RATIOS FORMULAS

1 Inventory Ratio Net Sales / Inventory

2 Debtors Turnover Ratio Total Sales / Account Receivables

3 Debt Collection Ratio Receivables x Months or days in a year / Net Credit Sales for the year

4 Creditors Turnover Ratio Net Credit Purchases / Average Accounts Payable

5 Average Payment Period Average Trade Creditors / Net Credit Purchases X 100

6 Working Capital Turnover Ratio Net Sales / Working Capital

7 Fixed Assets Turnover Ratio Cost of goods Sold / Total Fixed Assets

8 Capital Turnover Ratio Cost of Sales / Capital Employed

Capital Structure Ratios

S. No. RATIOS FORMULAS

1 Debt Equity Ratio Total Long Term Debts / Shareholders Fund

2 Proprietary Ratio Shareholders Fund/ Total Assets

3 Capital Gearing ratio Equity Share Capital / Fixed Interest Bearing Funds

4 Debt Service Ratio Net profit Before Interest & Taxes / Fixed Interest Charges

Overall Profitability Ratio

S. No. RATIOS FORMULAS

1 Overall Profit Ability Ratio Net Profit / Total Assets