Allama Iqbal College, Goheer Campus,

Bahawalpur

Ratios Analysis

A) Liquidity Ratios:
1) Current Ratio= Current Assets/ Current Liabilities
2) Quick Ratio= Quick Assets*/ Current Liabilities
3) Net Working Capital= Current Assets – Current Liabilities

*Quick Assets= Current Assets – Inventories

B) Debt Ratios:
4) Debt Ratio= Total Debt/ Total Assets
5) Debt to Equity Ratio= Total Debt/ Equity
6) Long Term Debt to Equity Ratio= Long Term Debt/ Equity
7) Total Capitalization Ratio= Long Term Debt/ Equity + Long Term Debt
8) Time Interest Earned Ratio= Earnings before Interest and Taxes (EBIT)/ Interest
9) Fixed Payment Coverage Ratio= EBIT + Lease Payment
Interest + Lease Payments+ {[(Principal+ Preferred
Stock Dividends)] x [1 (1-t)]}

C) Activities Ratios
10) Account Receivable Turnover Ratio= Net Cr. Sales/ Average Account Receivables
11) Average Collection Period= No. of Days in a year/ Account Receivable Turnover Ratio
12) Account Payable Turnover Ratio= Net Cr. Purchase or CGS/ Average Account Payables
13) Average Payment Period= No. of Days in a Year/ Account Payable Turnover Ratio
14) Inventory Turnover Ratio= Cost of Goods Sold/ Average Inventory
15) Average Age of Inventory= No. of days in a year/ Inventory Turnover Ratio
16) Fixed Assets Turnover= Sales/ Net Fixed Assets
17) Total Assets Turnover= Sales/ Total Assets

D) Profitability Ratios:
18) Gross Profit Margin= Gross Profit/ Sales* 100
19) Operating Profit Margin= Operating Profit/ Sales* 100
20) Net Profit Margin= Net Profit/ Sales* 100
21) Earnings per share (EPS) = Earnings available for Common Shareholders/
No. of Shares outstanding
22) Dividend per Share= Total Dividend/ No. of Shares outstanding
23) Return on Assets= Earnings available for Common Shareholders/ Total Assets
24) Return on Equity= Earnings available for Common Shareholders/ Equity
25) Price/Earnings Ratio= Market Price per Share/ Earning per Share
26) Market/ Book (M/B) Ratio= Market Price per Share/ Book Value per Share*
*Book Value per Share= Common Stock Equity/ No. of Shares Outstanding
27) Earning Yield= Earnings per share/ Market price per share
28) Dividend Yield= Dividend per share/ Market price per Share
29) Dividend Payout Ratio= Dividend per share/ Earning per share
30) Operating Cycle= Average Collection period+ Average Age of Inventory
31) Cash Conversion Cycle= Operating Cycle – Average Payment period

Instructor: Qaisar Latif qaisar.latif26@gmail.com