RATIOS FORMULAE

A. Profitability ratios
(1) Return on ordinary shareholders’ funds
Profit for the year (net profit) less any preference dividend x 100
Ordinary share capital + Reserves

(2) Return on capital employed

Operating profit x 100
Share capital + Reserves + Non-current liabilities*
*Total Assets-Current liabilities

(3) Operating profit margin

Operating profit x 100
Sales revenue

(4) Gross profit margin

Gross profit x 100
Sales revenue

B. Efficiency ratios

(1) Average inventories turnover trade period

Average inventories held x 365
Cost of sales

(2) Average settlement period for trade receivables

Average trade receivables x 365
Credit sales revenue

(3) Average settlement period for trade payables

Average trade payables x 365
Credit purchases

(4) Sales revenue to capital employed

Sales revenue
Share capital + Reserves + Non-current liabilities

(5) Sales revenue per employee

Sales revenue
Number of employees

C. Liquidity ratios

(1) Current ratio

Current assets
Current liabilities

1
 RATIOS FORMULAE

(2) Acid test ratio

Current assets (excluding inventories)
Current liabilities

D. Gearing ratios

(1) Gearing ratio

Long-term (non-current) liabilities
Share capital + Reserves + Long-term (non-current) liabilities

(2) Interest cover ratio

Operating profit
Interest payable

E. Investment ratios:

(1) Dividend payout/cover ratio

Dividends announced for the year x 100
Profit for the year

(2) Dividend yield ratio

Dividend per share/(1 - t) x 100
Market value per share

(3) Earnings per share

Profit for the year
Number of ordinary shares in issue

(4) Price/earnings ratio (P/E)

Market value per share
Earnings per share

(5) Dividend per share

Dividend payable to ordinary shareholders
Number of issued shares

The working capital cycle - compares/relates working capital efficiency:

Inventory Turnover days X

Add Debtor Collection/AR Days X
Less creditor payment/AP days (X)
Working Capital Cycle X