Formula Sheet

Ratios

Profitability Ratios:
Gross Profit Margin
= (Sales – Cost of goods sold) / Sales * 100 or,

Gross profit / Sales * 100

Net Profit Margin

Net profit before interest and tax
-------------------------------------- x 100
Sales

Cash profit ratio

(Cash profit)/ Sales x 100

Cash profit = Net profit + Depreciation

Return on Total Assets:

Net Profit after Tax
-------------------------------------- x 100
Total assets

Return on Shareholders Funds or Return on Net worth

(Net profit after Interest and Tax) / Net worth x 100

Net worth = Equity capital + Reserves and Surplus

Interest Cover
Profit before interest, depreciation and tax
Interest

Debt Service Coverage Ratio (DSCR)

Profit after tax + Depreciation + Interest on Loan

-----------------------------------------------------------------------
Interest on Loan + Loan repayment in a year

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Operating Ratios
Materials Cost Ratio = (Materials consumed) / Sales * 100

Labour Cost Ratio = (Labour cost) / Sales * 100

Factory overhead ratio = Factory expenses / Sales * 100

Administrative Expenses Ratio = Administrative expenses / Sales * 100

Selling & distribution expenses Ratio= (Selling and Distribution Expenses) / Sales

Operating ratio = (Cost of goods sold + Operating expenses) / Net sales

Stock turnover ratio = Cost of goods sold / Average inventory

Debt collection period = Debtors + Bills receivables / Average daily credit sales

Creditors’ velocity = Creditors + Bills payable / Average daily credit purchases

Working capital turnover ratios = Cost of goods sold / Working capital

Fixed asset turnover ratio = Cost of goods sold / Fixed assets

LIQUIDITY RATIOS

Current ratio:

Current assets, loans and advances

Current Ratio -------------------------------------------------------
Current Liabilities and Provisions

Quick Liquid/ Acid Test Ratio:

Current Assets, Loans and Advances – Inventories

-----------------------------------------------------------------------------
Current Liabilities & Provisions – Bank Overdraft

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Absolute Liquid/ Super Quick Ratio

Absolute Liquid Assets

---------------------------
Current Liabilities

Defensive Interval Ratio:

Liquid Assets
-----------------------------------------
Projected Daily Cash Requirement

Where Projected Daily Cash Requirement = Projected Cash operating Expenditure /

Number of days in a year.

Liquid Assets = Cash + Marketable Securities + Debtors

Earnings per share (EPS) = Net profit after tax and preference dividend
---------------------------------------------------------
No. of Equity shares

Cash earning per share = Net profit after tax + depreciation / No. of equity shares

Dividend Payout Ratio = Dividend per share/ earnings per share

Dividend Yield = Dividend per share / market price

Book Value = Equity capital + Reserves – P&L A/c Debit Balance

------------------------------------------------------------------------
Total number of equity shares

Price earnings Ration( P/E Ratio)

Current market price of equity shares

------------------------------------------
Earnings per share

Market Price to Book Value Ratio (P/BV ratio)

Market price per share

--------------------------
Book value per share

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LEVERAGE RATIOS

Debt equity Ratio

Long term debt
------------------
Shareholders funds

Shareholders Equity Ratio

Shareholders’ Equity
-----------------------------
Total Assets (tangible)

Long term debt to shareholders New Worth Ratio

Long term debt

----------------------------------
Shareholders Net worth

Capital Gearing Ratio

Fixed Interest bearing’s Funds

-----------------------------------
Equity Shareholder’s Funds

Fixed Assets to Long term Funds Ratio

Fixed Assets
----------------------
Ling term Funds

Proprietary Ratio
Shareholders Net worth
-----------------------------
Total Assets

Reserves to capital ratio = Reserves / Share capital

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 CVP Analysis
When information is given per unit

1) Break Even Point in units = Fixed Cost

Contribution per Unit.

Where, Contribution is = Selling Price – Variable cost.

2) Break Even Sales Volume = Fixed Cost * Selling Price Per Unit
Contribution Per unit

3) No. of. Units to be sold to earn a

Required Profit = Fixed cost + Profit
Contribution per Unit

When information is given in Volume

4) P.V. Ratio = Contribution * 100

Sales

(Or)
Difference in profit * 100
Difference in Sales

5) Break Even Point = Fixed Cost

P.V. Ratio

6) Margin of Safety = Actual Sales

Break Even Sales

7) Sales to earn a required Profit = Fixed Cost + Profit

P.V. Ratio

8) Profit at a given level of sales = Margin of safety * P.V. Ratio.

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Material Variances

1) Direct Material Cost Variances = Standard Quantity for Actual output *

Standard Price – Actual Quantity * Actual Price

2) Direct Material Usage Variances = (Standard Quantity – Actual Quantity)

*Standard Price.

3) Direct Material Price Variances = (Standard Price – Actual Price) * Actual

Quantity.

4) Direct Material Mix Variance = (Revised standard Quantity – Actual

Quantity) * Standard Price

Revised Std Quantity = Std. Quantity of Particular Material *Total Actual Quantity
Total Standard Quantity

5) Direct Material Yield Variance -

On the basis of loss

Std Loss on actual input – Actual loss (Average std Price per unit)

On the basis of output

Std Output for actual input – Actual output (Average std Price Per unit)

Average std price per unit = Total std cost

Standard output

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