FORMULA

1. Current Ratio : = Current Assets ( C.A )

Current Liabilities ( C.L )

Items of Current Asset : Items of Current Liabilities :

i) Sundry Debtors ( less Provision ) i) Sundry Creditors

ii) Trade Debtors/Book Debts ii) Trade Creditors
iii) Bills Receivable (B/R) iii) Bills Payable
iv) Closing Stock iv) Outstanding Exp/Wages
a) Raw Materials v) Bank Overdraft ( Short Term )
b) Finished Goods vi) Short Term Loan
c) Work in Progress (WIP) vii) Provision for Taxation
v) Stock in Trade viii) Cash Credit
vi) Inventory ix) Income Received in Advance
vii) Cash in Hand x) Other Provisions
viii) Cash at Bank xi) Unclaimed Dividend
ix) Advances xii) Proposed Dividend
x) Accounts Receivable xii) Accounts Payable
xi) Trade Investments ( Short Term)
xii) Marketable Securities
xiii) Prepaid Expenses NOTE : Non Trading Investment should not be considered
xiv) Accrued Income as Fixed Assets or Current Assets.
xv) Stores & Spares

2. Liquid Ratio/Quick Ratio/Acid Test Ratio : = Current Assets - (Stock+ Prepaid Expenses)
Current Liabilities - Bank Overdraft

3. Gross Profit Ratio : = Gross Profit X 100

Net Sales

i) Gross Profit = Sales - Cost of Goods Sold

ii) Net Sales = Total Sales - (Sales Return + Cash Discount)

4. Net Profit Ratio : = Net Profit ( after tax) x 100

Net Sales

Net Profit = (Gross Profit + Indirect Income) - Indirect Expences

5. Proprietary Ratio : = Proprietor's Fund

Total Assets - ( Fictitous Assets + Intangible Assets )

Proprietor's Fund : = ( Equity Share Capital + Preference Share Capital + Reserves & Surpluses )
- ( Intangible Assets+ Fictitous Assets )

Reserves & Surpluses = Intangible Assets = Fictitous Assets =

a) Profit & Loss Account i) Goodwill i) Preliminary Expences
b) Any Reserve ( i.e Capital/General) ii) Patent/Trademark ii) Misc. Expences
c) Accumulated Fund iii) Copy Rights iii) P & L Account (Dr.)
d ) Undistributed Profit iv) Design/Formula iv) Discount on Issue of Shares

MMR/RATIO ANALYSIS/ODD SEM/U.G. P.G.

 6. Debt Equity Ratio : = Total Debt ( Long Term + Short Term)
Proprietors Equity

Proprietors Equity = Proprietors Fund

Long Term Debt = Short Term Debt = Current Liabilities

i) Debentures / Bond
ii) Others Long Term Loan
iii) Secured Loan
iv) Mortgaged Loan
v) Public Deposit ( Long Term)

7. Capital Gearing Ratio : = Fixed Interest bearing Securities

Equity Share Holder's Fund

Fixed Interest bearing Securities =

i) Preference Share Capital
ii) Long Term Debt

Equity Share Holder's Fund =

i) Equity Share Capital
ii) Reserves & Surpluses

8. Operating Profit Ratio : = Operating Profit x 100

Net sales

Operating Profit = (Gross Profit + Operating Incomes) - Operating expences

9. Operating Cost Ratio : = (Cost of Goods Sold + Operating Expences) x 100

Net sales

Cost of Goods Sold = ( Sales - Gross Profit )

10 . Stock Turnover Ratio : = Cost of Goods Sold

Average Stock

Average Stock = ( Opening Stock + Closing Stock)

2

NOTE : If cost of goods sold or % of G.P.is not available then credit sales is to be
considered in place of Cost of Goods Sold.

11 . a) Debtor's Turnover Ratio : = Credit Sales

( In Times) Average Total Debtors

Average Total Debtors = 1( Opening Total Debtors + Closing Total Debtors )

2
Total Debtors =
i) Sundry Debtors
ii) Trade Debtors
iii) Bills Receivable / Accounts Receivable
iv) Book Debts
b) Debtor's Turnover/Velocity Ratio : = 12 Months or 365 days
( In Months or Days) Debtors Turnover Ratio ( in times)

MMR/RATIO ANALYSIS/ODD SEM/U.G. P.G.

 12 . a) Creditor's Turnover Ratio : = Credit Purchase
( In Times) Average Total Creditors

Total Creditors =
i) Sundry Creditors
ii) Trade Creditors
iii) Bills Payable / Accounts Payable

b) Creditor's Turnover/Velocity Ratio : = 12 Months or 365 Days

( In Months or Days) Creditors Turnover Ratio ( in times)

13 . Return on Capital Employed/Return on Investment ( ROI) =

Net Profit ( before Tax) x 100

Capital Employed

Capital Employed =
i) Equity Share Capital
ii) Preference Share Capital
iii) Reserves & Surpluses
iv) Any Long Term Debt

OR,

( Total Assets including Intangible Assets & Fictitous Assets ) - Current Liabilities

14 . Capital Turnover Ratio : = Net Sales

( In Times) Average Capital Employed

15 . Total Assets Turnover Ratio : Turnover/Sales

Total Assets( excluding Intangible & Fictitous Assets )

16 . Fixed Assets Turnover Ratio := Turnover/ Sales Fixed Assets =

Total Fixed Assets i) Land & Building
ii) Plant & Machinery
17 . Current Assets Turnover Ratio : = Turnover/Sales iii) Long Term Trading Investment
Total Current Assets iv) Furniture & Fixtures
v) Motor Car
vi) Etc
NOTE :Proprietor's Equity = Proprietor's Fund = Net Worth

18 . Absolute Liquid/Super Quick Ratio : Absolute Liquid Assets

Current Liabilities

Absolute Liquid Assets = Cash in Hand + Cash at Bank +Short Term Investments

19 . Debt Service Coverage Ratio (DSCR) :

Earning available for debt service

Interest on Loan + Loan Repayment in a Year (Installments)

Earning available for debt service = Profit after Tax + Depreciation + Interest on Loan

MMR/RATIO ANALYSIS/ODD SEM/U.G. P.G.