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Published byClementine Bennett Modified over 8 years ago

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Module Accounting & Finance Topic Ratio Analysis

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**Formulae for Ratio Analysis**

Liquidity Formulae for Ratio Analysis Profitability Shareholders Efficiency

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Liquidity Ratios Current Ratio Quick Ratio

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Liquidity Current Assets Current Ratio = Current Liabilities

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**Current Assets- Stock Quick Ratio = Current Liabilities Liquidity**

Note: Quick ratio is also called Acid test ratio

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Profitability Ratios Net Profit Margin Gross Profit Margin ROCE

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Profitability Net profit Net Profit Margin = X 100 Net Sales

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Profitability Gross profit Gross Profit Margin = X 100 Net Sales

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**Net Profit before Interest & Tax ROCE = Capital Employed**

Profitability Net Profit before Interest & Tax ROCE = X 100 Capital Employed ROCE =Return on Capital Employed

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Shareholders Ratios

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**Profit after preference dividend ROE = Equity Funds**

Shareholders Profit after preference dividend ROE = Equity Funds

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**Profit after preference dividend EPS = Number of Equity Shares**

Shareholders Profit after preference dividend EPS = Number of Equity Shares EPS = Earnings per Share

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**Dividends paid to Equity Shareholders**

DPS = Number of Equity Shares DPS = Dividends per Share

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**Dividends per share Dividend Yield = Market price per share**

Shareholders Dividends per share Dividend Yield = X 100 Market price per share

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Efficiency Ratios

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**Cost of sales Average Stock**

Efficiency Cost of sales Stock turnover = Average Stock

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Efficiency Debtors Debtors days = X 365 Credit sales

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**Creditors X 365 Credit Purchases**

Efficiency Creditors Creditors payment period = X 365 Credit Purchases

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**Loan capital + Preference capital**

Gearing Ratio = X 100 Capital Employed Loan capital = Long term loan + Debentures

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Liquidity Profitability Shareholders END Efficiency

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