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Quick assets
Quick ratio=
Current liabilities
Current liabilities
Current liabilities to net worth ratio=
Net worth
Ideal ratio:1:3
This ratio indicates the relative contribution of short term
creditors and owners to the capital of an enterprise. If
the ratio is high, it means it is difficult to obtain long term
funds by the business.
Capital Gearing Ratio
It expresses the relationship between equity capital and
fixed interest bearing securities and fixed dividend
bearing shares.
Fixed interest bearing securities + fixed dividend
bearing shares
CGR=
Equity shareholders funds
Components of fixed Components of equity
interest bearing securities shareholders funds
Debentures Equity share capital
Long-term loans Accumulated reserves &
Long-term fixed deposits profits
Less losses and fictitious
assets
Interpretation Of Capital Gearing
Ratio
When fixed interest bearing securities and fixed
dividend bearing shares are higher than equity
shareholders funds, the company is said to be highly
geared.
Where the fixed interest hearing securities and fixed
dividend bearing shares share equal to equity share
capital it is said to be evenly geared.
When the fixed interest bearing securities and fixed
dividend bearing shares are lower than equity share
capital it is said to be low geared.
If capital gearing is high, further raising of long term
loans may be difficult and issue of equity shares may
be attractive and vice-versa
Fixed Assets Ratio
It establishes the relationship between fixed assets and
capital employed
Fixed assets
Fixed assets ratio=
Capital employed
Cost of sales
Working capital turnover ratio=
Average working capital
Net sales
Fixed assets turnover ratio=
Fixed assets
Net sales
Total assets turnover ratio=
Total assets
Net profit
Return on total recourses = X 100
Total assets
Dividend Yield Ratio
It refers to the percentage or ratio of dividend paid per
share to the market price per share. This ratio throws
light on the effective rate of return on investment, which
potential investors may hope to earn.