Ratios Notes and Problem
Ratios Notes and Problem
Ratios Notes and Problem
Ratios could be expressed as numbers, number of days and e as percentages. Profitability ratios are
expressed in percentage, turnover ratios, liquidity ratios and few equity ratios are expressed in
numbers. Leverage ratios are expressed in proportion, and holding periods like inventory period,
receivables period, operating cycle and the like are expressed in number of days or in months.
Gross Profit
Gross Profit Margin = x 100
Net Sales
EBITDA
Cash Profit Margin = X 100
Net Sales
EBIT
Operating Profit Margin = X 100
Net Sales
PAT
Net Profit margin = X 100
Net Sales
EBIT
Return on Assets = Average Total Assets X 100
EBIT
Return on Capital Employed=Av L T Capital Employed X 100
Net Sales
Total Assets Turn over =
Average total Assets
Net Sales
Fixed Assets Turn over =
Average Fixed Assets
Net Sales
Current Assets Turn over=
Average Current Assets
Leverage Ratios
Coverage Ratios:
EBITDA -Tax
Interest Cover = Tangible Net worth
(Equity)
EBITDA- Tax
Debt Service Coverage
Ratio Interest + Current portion of long term
loans
Interest + Current portion of long term loans will be equal to interest and amount to be repaid the
current year
Liquidity Ratios
Current Assets
Current Ratio=
Current Liabilities
Current Assets- Inventory
Quick Ratio =
Current Liabilities
Cash and bank Balance
Cash ratio =
Current liabilities
Holding Periods
Average Inventory
Inventory Period=
Cost of Goods sold/365
Creditors ( Payable) Average Trade Creditors ( Payable
2
period= Cost of Raw Material ( or
purchase)/365
Average Debtors ( Average Receivable
receivable Credit Sales/365
Inventory Ratios can be calculated for raw material (denominator raw material purchased/365),
finished goods (denominator cost of goods sold/365) if average data on these is available and also
annual consumption information is available.
Operating Cycle
Between operating period and the operating cycle the denominator is different. In the case of
operating cycle denominator is net sales
Average Inventory
Inventory Period=
Net Sales /365
Average Trade Creditors ( Payable
Creditors ( Payable) period=
Net Sales/365
Average Receivable
Average Debtors ( receivable) +
Net Sales /365
Operating Cycle = Inventory Period+ Receivable Period
Net Operating Cycle= Operating cycle + Creditor Period
Equity Ratios
PAT
Earnings Per Share
Number of shares outstanding
Total Dividend Paid
Dividend Per Share=
Number of shares
DPS
Pay out Ratio =
EPS
Tangible Net Worth
Book Value Per Share=
Number of shares outstanding
Current Market Price per share
P E Ratio=
EPS
Price to Book Value (PB) CMP
ratio= Book Value per share
Tangible Net worth
Book Value Per Share=
Number of shares outstanding
3
Given below are the balance sheet and profit and loss account of MyCO Ltd. Calculate the ratios
of the company and fill-in the blank cells in Ratios of MyCO
4
Profit and Loss Account of MyCO ltd
2015-16 2014-15
Net sales 29810.62 32502.41
Raw material cost 18339.80 20105.77
Employee cost 603.53 650.13
Power and fuel 4541.65 4534.41
Other Manufacturing Expenses 1235.56 1099.99
Depreciation 1217.97 1011.67
General and Administration Expenses 911.23 925.00
Selling and Distribution Expenses 268.02 236.04
Miscellaneous Expenses 5.01 322.43
Total operating cost 27122.77 28885.44
EBIT 2687.85 3616.97
Interest 3541.36 3655.93
PBT and extraordinary items -853.51 -38.96
Other income/expenses 8823.82 2008.86
Exceptional income/expenses -2490.41 -2.43
PBT 5479.90 1967.47
Tax 8.02 40.27
PAT 5471.88 1927.20
Dividend 1037.75 1215.65
5
Ratios of MyCO Ltd
Cash Profit Margin
Operating Profit Margin
Net Profit Margin
ROA
ROE
Total assets turnover
Fixed Assets Turnover
Current Assets Turnover
Current Ratio
Debt-Equity
TOL/TNW
Interest Cover
Inventory Period
Receivables Period
Creditors Period
Operating Cycle
Net Operating Cycle
Book value per share
P/B
P/E