Operating Ratios

Ratio
Sales Return
Sales Discounts
Gross Margin
Cost of Goods Sold
Net Profit Margin

Productivity
Tax Ratio
Expense Items
Return on Capital Employed
Return on Total Assets
Revenue and Expense Item
Total Assets Turnover
Debtors' Turnover
Stock Turnover
Creditors' Turnover

Method of Calculation
Sales Returns x 100
Sales
Sales Discounts x 100
Sales
Cost of Goods Sold x 100
Sales
Cost of Goods Sold - Sales x 100
Sales
Trading Profit Before Interest & Tax x 100
Sales
Value Added x 100
Sales
Tax Charge x 100
Profit Before Tax
Expense x 100
Sales
Trading Profit x 100
Tangible Net Assets
Trading plus Other Income x 100
Total Assets
Depreciation Charge x 100
Gross Depreciable Assets
Total Assets
Sales
Sales
Average Debtors
Sales
Average Stocks
Sales
Trade Creditors

Significance
Measures the saleability of stock
Measures the extent to which the terms
of sale affect turnover
Shows the relationship between costs and
sales value of items sold
Shows the margin between sales and costs
Measures the efficiency of the
organisation to generate profits from
sales
Measures the additional wealth created
by the organisation
Measures the proportion of tax charged
Relates individual expenses, eg research
and development, to sales
Measures the efficiency of the
organisation
Measures the efficiency in utilizing
available assets
Identifies depreciable assets and the
extent of the depreciation provision
Measures the utilization of assets in
generating sales
Measures the control of credit
Measures the control of stocks in relation
to sales
Measures the speed of payment by creditors

Efficiency Ratios
Ratio
Operating Leverage

Financial Leverage
Debt Ratio

Equity Ratio
Debt to Equity Ratio

Total Debt to Total Assets

Interest Cover

Method of Calculation
Percentage change in
Earnings Before Interest and Taxation (EBIT)
Percentage change in Output
EBIT
EBIT - Interest Expense
Total Liabilities
Total Assets
Shareholder's Funds
Total Assets
Total Debt
Shareholder's Funds
Debt + Current Liabilities x 100
Total Assets
Profit Before Interest
Interest

Significance
Measures the extent to which fixed costs
are used in the organization's operations
Measures the debt utilization in
financing assets
Measures the proportion of assets
financed through borrowings and the
extent of trading on equity
Shows the protection to creditors and
the extent of trading on equity
Shows the relationship between borrowed
capital and capital invested by
shareholders
Measures the percentage total funds
provided by creditors
Measures the extent to which interest
charges are covered by profits

Liquidity Ratios
Ratios
Current Ratio
Liquid Ratio
Cash days to Sales
Gross Funds to Debt
No Credit Interval

Method of Calculation
Current Assets
Current Liabilities
Current Assets - Stocks
Current Liabilities
Short Term Investments plus Cash x 100
Sales
Gross Funds from Operations x 100
Current Liabilities and Loans
Debtors plus Short Term
Investments plus cash
x 365
Operating expenses
- Depreciation

Significance
Measures the organization's liquidity
position
Measures the ability to meet short term
liabilities
Indicates the reasonableness of liquid
assets in relation to sales
Measures the extent to which short term
obligations are covered by gross funds
Measures the number of days the most
liquid assets could support operating
expenditures

Investment Ratios
Ratios
Earnings Per Share (EPS)

Earnings Yield
Price Earnings Ratio

Method of Calculation
Earnings before Extraordinary items
but after deducting tax, minority
interest and preference dividends
Number of Ordinary Shares
Earnings per Share (EPS) x 100
Price per Share
Market Price per Share
Earnings per Share

Dividend Yield

Dividend per Share

Market Price per Share

Dividend Cover

Earnings per Share

Net Dividend per Share
Profit after tax but before extraordinary items
and after deducting minority interest
and preference dividends
Equity Shareholders' Investment
Ordinary and
Preference Dividends x 100
Retained Earnings or Profit

Return on Equity

Payout Ratio

Significance
Shows the amount of earnings attributable
to each ordinary share

Shows the earnings return per share based

on the current share price
Measures whether the price of an ordinary
share is in line with the organizations'
earnings
Measures the return to ordinary
shareholders on the current market price
of the share
Measures the extent to which dividends
are protected by earnings
Measures the efficiency in earning a
satisfactory return on equity
shareholders investment
Shows the relationship between dividends
and retained profits