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Ratio Analysis - Easy To Remember

The document discusses various types of financial ratios used for analysis including: activity ratios, liquidity ratios, solvency ratios, profitability ratios, and valuation/investment ratios. It provides the formulas and definitions for numerous individual ratios within each category such as current ratio, debt-to-equity ratio, return on assets, and price-to-earnings ratio. The ratios measure aspects of a company's operations, liquidity, debt levels, profitability, and stock valuation.

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KhushbuJ
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9K views3 pages

Ratio Analysis - Easy To Remember

The document discusses various types of financial ratios used for analysis including: activity ratios, liquidity ratios, solvency ratios, profitability ratios, and valuation/investment ratios. It provides the formulas and definitions for numerous individual ratios within each category such as current ratio, debt-to-equity ratio, return on assets, and price-to-earnings ratio. The ratios measure aspects of a company's operations, liquidity, debt levels, profitability, and stock valuation.

Uploaded by

KhushbuJ
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Ratios-Tools for financial analysis

Types of Ratios

Activity

Liquidity

Valuation/Investment
Solvency Profitability

Activity Ratios

Ratio Numerator Denominator


Inventory turnover COGS Average Inventory

Days of Inventory on hand Number of days in a period Inventory turnover


(DOH)
Receivables turnover Revenues Average Receivables

Days of Sales Number of days in a period Receivables turnover


Outstanding(DSO)
Payables Turnover Revenues Average Payables

Days of payables Number of days in a period Payables Turnover


outstanding(DPO)

Working Capital turnover Revenues Average working capital

Fixed Asset turnover Revenues Average fixed assets

Total asset turnover Revenues Average Total assets


Liquidity Ratios

Ratio Numerator Denominator


Current Ratio Current Assets Current Liabilities
Quick Ratio Cash+ Short term Marketable Current Liabilities
securities+ Receivables

Cash Ratio Cash+ Short Term Marketable Current Liabilities


Securities

Cash Conversion Cycle DOH+DSO-DPO

Solvency Ratios

Ratio Numerator Denominator

Debt-to-assets Total debts Total assets

Capitalization Ratio Total debt Total Debt+ Total Equity

Debt-to-equity or capital Total debt Total Equity


gearing ratio

Financial Leverage Ratio Average Total assets Average Total Equity

Interest Coverage EBIT Interest expense

Profitability Ratios

Ratio Numerator Denominator

Gross Profit Margin Gross Profit Revenues

Operating Profit Margin O/P Profit Revenues

Pre-tax Profit Margin PBT Revenues

Net Profit Margin PAT Revenues

ROA Net Income Average Total assets

*ROE Net Income Average Total Equity


Investment/Valuation Ratios

Ratio Numerator Denominator

EPS Net income-Preferred Dividends Weighted average number of


shares outstanding

P/E Price per share EPS

Cash Flow per share CFO Average number of shares


outstanding

Dividend Payout Ratio Dividend per share EPS

Dividend Retention Ratio (r) 1-Dividend Payout Ratio

Sustainable growth rate(g) r * ROE

*DuPont Analysis-Decomposition of ROE

ROE= Net Income/Average Total Equity

= (Net Income/Average Total assets) *(Average Total assets/Average Total Equity)

= ROA * Leverage

Or

ROE= Net Income/ Average Total Equity

= (Net Income/Revenue)*(Revenue/Average Total assets)*(Average Total assets/Average Total


Equity)

= Net Profit Margin *Asset turnover *Leverage

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