This will be very helpful for Anna University MBA Examination. I Did M.B.A 2011-2013 at Jei Mathaajee College of Engineering (Affiliated to Anna University).
problems on ratio analysis
Ratio Analysis - Tata Motors 2004 - 2008Full description
An idea about how to go through a ratio analysis for a company under observation
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Learn how to analyse financial statements of companies with key financial ratios
this word file contains formulae of various financial ratios, ideal values and interpretation... this will be very helpful for those who wants to do ratio analysis.....Full description
RATIO ANALYSIS Important Formula: (1) Gross Profit Ratio = Gross Profit X 100 Net Sales Gross Profit = Net Sales – Cost of Goods Sold Net Sales = Total Sales – Sales Return Total Sales = Cash Sales + Credit Sales Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Purchase Return – Closing Stock (2) Net Profit Ratio = Net Profit X 100 Net Sales Net Profit = Gross Profit – Operating Expenses + Non Operating Incomes – Non Operating Expenses Operating Expenses = (SODA) Selling Expenses + Office Expenses + Distribution Expenses + Administrative Expenses (3) Operating Profit Ratio = Operating Profit X 100 Net Sales Operating Profit = Gross Profit – Operating Expenses OR Operating Profit = Net Profit + Non Operating Expenses – Non Operating Income (4) Operating Ratio = Operating Cost X 100 Net Sales Operating Cost = Cost of Goods Sold + Operating Expenses
(5) Operating Ratio + Operating Profit Ratio =1 (6) Return on Investment (ROI) = Profit before Interest, Tax & Dividend X 100 Capital Employed Also
Where, Profit before interest, Tax & Dividend = Profit After Tax + Interest + Tax = Profit after Interest + Interest Capital Employed = Share Capital (Equity + Preference) + Reserves + Surplus/Profit & Loss A/c (Cr.)/Accumulated Profits
+ Debentures + Long term loans – [Preliminary Expenses – Discount/Commission or Issue of Share / Debenture – Profit & Loss A/c (Dr. Balance)]
ALTERNATIVELY Capital Employed = Net Fixed Assets + Long Term Investments + Working Capital Net Fixed Assets = Total Fixed Assets – Depreciation Working Capital = Current Assets – Current Liabilities (7) (a) Return on Shareholder's Funds = Profit after Interest & Tax but before Dividend X 100 Equity or Shareholder's Funds Equity or Shareholders' Fund = Share Capital (Equity + Preference) + Reserve + Surplus / Profit & Loss A/c (Cr. Balance) or accumulated profits – Preliminary Expenses – Discount/Commission on Issue of Share Debentures – Profit & Loss A/c (Dr. Balance) or Accumulated Losses
Profit after Interest, Tax but before Preference Dividend = Profit after Tax – Preference Dividend = Profit after Interest – Tax – Preference Dividend = Profit before Interest – Interest – Tax – Preference Dividend (7) (b) Return on Equity (ROE) = Profit after interest, Tax & Pref. Dividend X 100 Equity Shareholder's Funds Equity shareholder's Fund = Equity Share Capital + Reserve + Surplus / Profit & Loss A/c (Cr. Balance) or accumulated profits – Preliminary Expenses – Discount / commission on issue of Share Debentures – Profit & Loss A/c (Dr. Balance) or Accumulated Losses (8) Interest coverage (Debt Service) Ratio = Profit before Interest, Tax & Dividend Interest on Debentures & Loans (9) Current Ratio = Current Assets Current Liabilities Current Assets = Cash in Hand + Cash at Bank + Bills Receivable + Sundry Debtors + Marketable Securities or Short term Investments + Loans & Advances + Stock / Inventories + Prepaid Expenses + Accrued Incomes
(10) Liquid Ratio / Quick Ratio / Acid Test Ratio = Liquid Assets or Quick Assets Current Liabilities Liquid Assets = Current Assets – Closing Stock – Prepaid Expenses (11) Stock Turnover Ratio (STR) = Cost of Goods Sold Average Stock Average Stock = ½ (Opening Stock + Closing Stock) (12) Debtors Turnover Ratio (DTR) = Net Credit Sales in a year Average Accounts Receivable Average A/c Receivable = ½ (Opening A/c Receivable + Closing A/c Receivable) Accounts Receivable = Debtors + B/R OR Account Receivable = Opening Debtor + Opening B/R + Closing Debtors + Closing B/R 2 (13) Average Debt Collection Period = Days or Months in a year Debtors Turnover Ratio Alternatively, Average Debt Collection Period = Days or Months in a year X Accounts Receivable in a year Net Credit Sales in a year (14) Creditors Turnover Ratio (CTR) = Net Credit Purchases Average Accounts Payable Average A/c Payable = ½ (Opening A/c Payable + closing A/c Payable) Accounts Payable = Creditors + B/P (15) Average Payment Period = Days or Months in a year Creditors Turnover Ratio Alternatively, Average Payment Period = Days or Months in a year X Accounts Payable in a year Net Credit Purchases in a year (16) Capital Turnover Ratio = Net Sales Capital Employed (17) Fixed Assets Turnover Ratio = Net Sales Net Fixed Assets Net Fixed Assets = Gross Fixed Assets - Depreciation (18) Working Capital Turnover Ratio = Net Sales Working Capital Working Capital = current Assets – Current Liabilities
(19) Assets Turnover Ratio = Net Sales Total Assets Total Assets = Fixed Assets + Long Term Investment Current Assets (20) Debt-Equity Ratio = Long term Debt or Loans Equity or Shareholders' Funds Long term Debts = Debentures + Loans or Mortgage OR Long Term Debts = Total Debts – Current Liabilities (21) Debt Total Fund Ratio = Long Term Debts Total Long Term Funds Total Funds Term Fund = shareholder's Funds + Long Term Debts (22) Proprietary Ratio = Shareholder's Funds or Proprietor's Fund Total Assets Shareholder's Funds = Share Capital (Equity + Preference) + Reserves + Surplus/Accumulated Profit or P/L A/c(Cr) - Preliminary Expenses – Discount on issue of Shares/Debentures – P/L A/c (Dr.) Also
