ACCOUNTING RATIOS

1. Liquidity Ratios.
(Working Capital Ratio or Current Ratio).
=
Working Capital Ratio =

Current Assets
Current Liabilities

(Quick Assets, or Liquidity or Acid test ratio).

=
Quick Assets Ratio =

Current Assets - Stock

Current Liabilities

(Immediate Cash Ratio)

=
Immediate Cash Ratio =

Cash + Bank
Current Liabilities

() (Stock Turnover
Ratio).
=
=

+
2

Stock Turnover Ratio =

Average Stock =

Cost of Sales
Average Stock

Opening Stock + Closing Stock

2

(Debtors Ratio).
=

Debtors Ratio =

365 52 12

Debtors X 365 or X 52 or X 12
Net Credit Sales

 (Creditors Ratio).
=

Creditors Ratio =

365 52 12

Creditors X 365 or X 52 or X 12
Net Credit Purchases

2. - Profitability Ratios.
(Gross Profit Ratio).
=

100
( + )
Gross Profit X 100
Net Sales (Cash + Credit Sales)

Gross Profit Ratio =

(Net Profit Ratio).

=

100
( + )
Net Profit X 100
Net Sales (Cash + Credit Sales)

Net Profit Ratio =

(Return on Capital
Employed).
=

100

= + + +

Return on Capital Employed Ratio =

Net Profit After Tax

Capital Employed

X 100

(Net Income as a
Percentage of Equity Capital).
. =

100

Net Profit after Tax Preference Dividend

Equity Capital (Ordinary Share Capital)

X 100

Net Income as a Percentage of Equity Capital Ratio =

3. .
(Capital Gearing Ratio).
=

Capital Gearing Ratio =

. +

Equity Capital (Ordinary Share Capital)

Preference Share Capital + Long Term Liabilities (Fixed Interest Capital)

(Reserves to Equity Capital Ratio or Self Financing Ratio).
=

Reserves to Equity Capital Ratio =

100

Reserves X 100
Equity Capital ( Ordinary Share Capital)

(Net Assets Value of Shares).

=

Net ssets Value of Shares =

Ordinary Share Capital + Reserves

Number of Ordinary Shares

(Dividend as a Percentage to
Ordinary Share Capital).
=

Dividend as a Percentage to Ordinary Share Capital =

Ordinary Share Dividend

Ordinary Share Capital

100

X 100

(Preference Dividend Cover).

=

Preference Dividend Cover =

Net Profit fter Taxation

Preference Dividend

(Ordinary Dividend Cover).

=

Ordinary Dividend Cover =

Net Profit after Taxation Preference Share Dividend

Ordinary Dividend

 (Earnings Per Share Ratio).

=

Earnings per Share Ratio =

Net Profit after Taxation Preference Share Dividend

Number of Ordinary Shares

(Dividend
Yield).
=

Dividend Yield =

( )

Dividend per Share

Market Value per Share

100

X 100