Ratio formulas
Ratio formulas
Presented by
Dr
.
B. N. Shinde
Assistant Professor
Department of Commerce
Deogiri College, Aurangabad
Calculations of Ratio
1. Gross Profit Ratio =
Gross profit
Net Sales
100
2. Net Profit Ratio =
Net profit after interest & tax
Net Sales
100
Net profit
Net Sales
100
=
OR
=
EAT
Net Sales
100
OR
3. Operating Ratio =
Cost of Goods Sold + Operating Expenses
Net Sales
100
Here,
Cost of Goods Sold =
Opening Stock+ Purchases +Direct Exp (Manufacturing exp.)
–
Cl. Stock
OR
Cost of Goods Sold
= Sales
–
Gross Profit
Operating Expenses
=
Administrative Exp.
+
Selling & Distribution Exp.
Administrative Expenses
= Rent
+
Insurance
+
Office Salary
+
Rates & taxes
+
Audit fees
+
Director fees
+
Legal fees
+
Depreciation.
Selling & Distri. Expenses =
Salary to salesman + Advertising + Travelling Exp. + B/d + RDD
+ Discount + Carriage Outwards + Free Samples + Commission
+ Packaging expenes etc.
4. Return on Capital Employed Ratio =
N/P before Interests, Taxes and Dividends
100
Capital Employed (or Long term funds)
Net capital Employed =
Net Fixed Assets
+
Net Current Assets
Capital Employed =
Total Fixed Assets
+
(CA
–
CL)
(Note: Fictitious Assets are not included in capital employed)
OR
Capital Employed =
Equity share capital
+
Pref. share capital
+
Reserve & Surplus
+
Long term loans ( Secured & unsecured )
–
Non-Operating Assets
Non-Operating Assets =
Investments, Fictitious Assets such as goodwill, Development Cost etc
.
OR
Capital Employed =
Total Tangible Assets - CL
5. Stock Turnover Ratio =
Cost of Goods Sold
Average Stock
Cost of Goods Sold =
Opening stock + Purchases + Direct Exp. – Closing Stock
OR
= Net Sales – Gross Profit
Average Stock =
Opening Stock + Closing Stock
2
Alternative Formulas:
Net Sales
Average Stock
OR
Net Sales
Closing Inventory
Note : This ratio Shows in times
6. Debtors turnover Ration =
Net Credit Sales
Avg. Debtors + Avg. B/R
Or
In case of Non availability of information-
Total Sales
Closing Balance of Debtors + Closing B/R
DTR =
Average Collection Period or Debtors Velocity =
Avg. A/c Receivables
Net Credit Sales
No. of working day’s
Avg. A/c Receivables =
Opening Debtors & B/R + Closing Debtors & B/R
2
7. Creditors Turnover Ratio (CTR) =
Net Credit Purchases
Avg. creditors + Avg. Bills payable (Avg. Payables)
Average Payment Period ( Creditors Velocity ) =
Average A/c Payables
Net Credit Purchases
No. of working day’s
Note : Net Credit Purchases = Total credit purchases Less Return Outwards
8. Current Ratio =
Current Assets
Current Liabilities
Current Assets =
Cash in hand + Petty cash + Closing Stock + Bills Receivables +
Accrued Income + Stores & spare parts + Loose Tools + Sundry debtors +
Prepared exp. + Consignments + Loans & advances + cash at Bank + Short
term Investments (Marketable Securities) + Raw Materials + WIP + Finished
Goods + Installment sale receivable.
Current Liabilities =
Sundry (Trade) Creditors + Bills Payable + Bank Overdraft +
Outstanding exp. + unclaimed dividend + Interest due + Provision for
taxation + Proposed dividend + Reserve for doubtful debts (RDD) +
Cash credits.
9. Liquid Ratio Or Quick Ratio Or Acid Test Ratio Or Near Money Ratio =
Quick or Liquid Assets
Quick or Liquid Liabilities
Quick or Liquid Assets
= All Current Assets – Stock + Prepared expenses
Quick or Liquid Liabilities
= All Current liabilities except Bank Overdraft
10. Proprietary Ratio or Capital Ratio or Equity Ratio =
Proprietors Funds ( Shareholders funds )
Total tangible Assets
Shareholders funds
= Equity Share Capital + Pref. Share Capital + General Reserve
+ Profit + Capital Reserve + Revenue Reserve + Reserve for
contingencies + Sinking funds
Note : Intangible Assets not included in Total Assets such as Profit & loss A/c (Dr. ),
Goodwill, Patents, Copy Right, Preliminary expenses, Discount on Issue of shares
Development cost etc.
Dr. B. N. Shinde, Assistant Professor, presents various ratio formulas including Gross Profit Ratio, Net Profit Ratio, Operating Ratio, Return on Capital Employed Ratio, Stock Turnover Ratio, Debtors Turnover Ratio, and Creditors Turnover Ratio. The content covers calculations and definitions related to ratio analysis in commerce, such as cost of goods sold, operating expenses, net credit sales, and net credit purchases.
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Presentation Transcript
Ratio formulas Presented by Dr. B. N. Shinde Assistant Professor Department of Commerce Deogiri College, Aurangabad
Calculations of Ratio Gross profit 100 1. Gross Profit Ratio = Net Sales Net profit 2. Net Profit Ratio = 100 Net Sales OR Net profit after interest & tax = 100 Net Sales OR EAT = 100 Net Sales
Cost of Goods Sold + Operating Expenses 3. Operating Ratio = 100 Net Sales Here, Cost of Goods Sold = Opening Stock+ Purchases +Direct Exp (Manufacturing exp.) Cl. Stock OR Cost of Goods Sold = Sales Gross Profit Operating Expenses = Administrative Exp. + Selling & Distribution Exp. Administrative Expenses = Rent + Insurance + Office Salary + Rates & taxes + Audit fees + Director fees + Legal fees + Depreciation. Selling & Distri. Expenses = Salary to salesman + Advertising + Travelling Exp. + B/d + RDD + Discount + Carriage Outwards + Free Samples + Commission + Packaging expenes etc.
N/P before Interests, Taxes and Dividends 4. Return on Capital Employed Ratio = 100 Capital Employed (or Long term funds) Net capital Employed = Net Fixed Assets + Net Current Assets Capital Employed = Total Fixed Assets + (CA CL) (Note: Fictitious Assets are not included in capital employed) OR Capital Employed = Equity share capital + Pref. share capital + Reserve & Surplus + Long term loans ( Secured & unsecured ) Non-Operating Assets Non-Operating Assets = Investments, Fictitious Assets such as goodwill, Development Cost etc. OR Capital Employed = Total Tangible Assets - CL
Cost of Goods Sold 5. Stock Turnover Ratio = Average Stock Cost of Goods Sold = Opening stock + Purchases + Direct Exp. Closing Stock OR = Net Sales Gross Profit Opening Stock + Closing Stock Average Stock = 2 Net Sales Net Sales Alternative Formulas: OR Average Stock Closing Inventory Note : This ratio Shows in times
Net Credit Sales 6. Debtors turnover Ration = Avg. Debtors + Avg. B/R Or In case of Non availability of information- Total Sales DTR = Closing Balance of Debtors + Closing B/R Avg. A/c Receivables Average Collection Period or Debtors Velocity = No. of working day s Net Credit Sales Avg. A/c Receivables = Opening Debtors & B/R + Closing Debtors & B/R 2
Net Credit Purchases 7. Creditors Turnover Ratio (CTR) = Avg. creditors + Avg. Bills payable (Avg. Payables) Average Payment Period ( Creditors Velocity ) = Average A/c Payables No. of working day s Net Credit Purchases Note : Net Credit Purchases = Total credit purchases Less Return Outwards
Current Assets 8. Current Ratio = Current Liabilities Current Assets = Cash in hand + Petty cash + Closing Stock + Bills Receivables + Accrued Income + Stores & spare parts + Loose Tools + Sundry debtors + Prepared exp. + Consignments + Loans & advances + cash at Bank + Short term Investments (Marketable Securities) + Raw Materials + WIP + Finished Goods + Installment sale receivable. Current Liabilities = Sundry (Trade) Creditors + Bills Payable + Bank Overdraft + Outstanding exp. + unclaimed dividend + Interest due + Provision for taxation + Proposed dividend + Reserve for doubtful debts (RDD) + Cash credits.
9. Liquid Ratio Or Quick Ratio Or Acid Test Ratio Or Near Money Ratio = Quick or Liquid Assets Quick or Liquid Liabilities Quick or Liquid Assets = All Current Assets Stock + Prepared expenses Quick or Liquid Liabilities = All Current liabilities except Bank Overdraft
10. Proprietary Ratio or Capital Ratio or Equity Ratio = Proprietors Funds ( Shareholders funds ) Total tangible Assets Shareholders funds = Equity Share Capital + Pref. Share Capital + General Reserve + Profit + Capital Reserve + Revenue Reserve + Reserve for contingencies + Sinking funds Note : Intangible Assets not included in Total Assets such as Profit & loss A/c (Dr. ), Goodwill, Patents, Copy Right, Preliminary expenses, Discount on Issue of shares Development cost etc.
