Profitability ratios
Ø
Return On Capital Employed = (Profit Before
Interest and Tax / Capital Employed) * 100%
Ø
Return on Equity = (Earnings attributable to
ordinary shareholders / Shareholders' equity) * 100%
Ø
Asset Turnover = Sales / Capital Employed
Ø
Net Profit Margin = (Profit Before Interest and
Tax / Sales) * 100%
Ø
Gross Profit Margin = (Gross Profit / Sales) *
100%
Liquidity ratios
Ø
Current ratio = Current assets / Current
Liabilities
Ø
Quick ration (Acid Test Ratio) = (Current Assets
- Inventory) / Current Liabilities
Ø
Efficiency ratios
o
Receivables/debtors' collection period =
(Receivables / Sales) * 365days
o
Payables/creditor's payment period =
(Payables/Purchases) * 365days
o
Inventory/stock turnover period =
(Inventory/Cost of sales) * 365days
Investors' ratios
Ø
Earnings per share = Earnings attributable to
ordinary shareholders / Number of ordinary shares
Ø
Dividend payout ratio = Dividend per share /
Earnings per share
Ø
Dividend cover = Earnings per share / Dividend
per share
Ø
Dividend yield = (Dividend per share / Market
value of share) * 100%
Ø
Price Earnings ratio = Current share price per
share / Earnings per share
Gearing ratios
Ø
Financial gearing (equity) = Prior charge
capital / Equity capital (including reserve)
Ø
Financial gearing (total) = Prior charge capital
/ (Equity capital + Debt) ((Prior
charge capital gives holder right to receive interest and dividends.))
Ø
Operational leverage = Fixed costs / Variable
costs
Ø
Operational gearing = Contribution / Profit Before Interest and
Tax
Ø
Interest cover = Profit before interest and
taxation / Interest payable
Interrelation between ratios: Du Pont analysis
Return on equity = Return on investment * (Total
assets/Equity)
Ø
Return on investment = Return on sales * Assets
turnover
o
Return on sales = Net income/Sales
§
Net income = Sales - Total costs
o
Assets turnover = Sales/Total assets
§
Total assets = Non-current assets + Current
assets
ROFCE = ROCE means current ratio is 1. (R = Return, O = On,
F = Fixed, C = Capital and E = Employed)
CIMA Article: Financial Analysis
ACCA Article: Interpreting Financial Statements - RATIOS
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ReplyDeleteMr, Pedro Loan Offer
Email- pedroloanss@gmail.com.