FINANCIAL RATIOS FOR THE ASSESSMENT OF MONEY SERVICE BUSINESSES
CATEGORY OF RATIO
Profitabilty
1. Gross Profit Margin (GPM)
2. Net Profit Margin (NPM)
3. Return on Assets (ROA)
4. Return on shareholders Equity(ROE)
LIQUIDITY & SOLVENCY
LIQUIDITY
1. Current ratio
SOLVENCY
1. Assets to Liabilities Ratio (ALR)
EFFICIENCY OF PERFORMANCE
1. Overhead Effi ciency Ratio (OER)
2. Asset Turn Over Ratio
3. Ratio of Interest Earning Assets to Total
Assets
FORMULAE
GPM = Gross Profit /Sales(revenue)
NPM=Net Profit beforeTax/Sales(Revenue) X100
ROA=Net profit before Tax/Total Assets x100
ROE=NPAT-Preference Dividend/Share
Capital+Reserves x100
Current Ratio=Current Assets/Current Liabilities
ALR=Total Assets/Total Liabilities
OER=Overheads/Revenue x100
ATOR=Revenue/Assets x$1
IEATTA= Interest Earnings Assets/Total Assets
COMMENTS
Highlights the ratio of cost of sales to revenue
Measures the percentage of revenue earned that is
converted to profit
Measures the return on funds provided by debt and
equity holders of the MSB
Measures the return on funds provided by equity
holders of the MSB
Measures the ability of the MSB to meet short term
debt obligations on timely basis
Indicates that the coverage of assets to liabilities
and thus the long term viability of the business. A
ratio greater than 1 indicates solvency, whereas a
ratio less than 1 indicates insolvency.
The lower the ratio or percentage the more effi cient
the MSB
Indicates that the revenue generated by each dollar
of assets invested in the MSB
Measures the effi cient use of assets by the MSB