ACCOUNTING RATIOS AT A GLANCE

Page no : 2

(Guest)

Thanks Prakash....

Great job.....

it give the good refreshment

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thanumalayan (senior assistant) (111 Points)
Replied 25 May 2008

Wonderful job. It's useful for all CA Students. Pls give more useful things, in future. Thanks a lot!

Vinod (Assistant Audit Officer) (1675 Points)
Replied 30 May 2008

thanx a ton man

(Guest)

nice job... do well

Manisha (CA final Student) (118 Points)
Replied 15 July 2008

Originally posted by :CA Prakash
"	ACCOUNTING RATIOS To test Name of Ratio Formula Parties interested Industry norm Liquidity and Solvency i) Current Ratio Current AssetsCurrent Liabilities Short-term creditors, investors, money lenders & like parties 2:1 ii) Liquid/Quick/Acid Test Ratio Current assets - Stock - Prepaid ExpensesCurrent Liabilities - Bank Overdraft - Prereceived Income -do- 1:1 iii) Absolute Liquid Ratio Cash + Marketable securitiesQuick Liabilities -do- 1:1 iv) Proprietary Ratio Proprietor's FundTotal Assets [Proprietor's funds = Equity Capital + Preference Capital + Reserves and Surplus + Accumulated funds - Debit balances of P & L A/c and Miscellaneous Expenses] -do- 60% to 75% Capitalisation i) Debt Equity Ratio DebtEquity [Debt = Long/Short-term loans, debentures, bills, etc, Equity = Proprietor's funds] -do- 2:1 ii) Capital Gearing Ratio Fixed cost fundsFunds not carrying fixed cost [Fixed cost funds = Preference share capital, Debentures, Loans from banks, financial institutions, other unsecured loans]. [Funds not carrying fixed cost = Equity share capital + undistributed profit - P & L A/c (Dr. Bal.) - Misc. expenses]. -do- 2:1 Profitability and management efficiency i) Gross Profit Ratio Gross Profit x 100Net sales Shareholders, Long-term Creditors, Government 20% to 30% ii) Net Profit Ratio Net Profit x 100Net sales [Net profit may be either Operating Net profit, Profit before tax or Profit after tax]. -do- 5% to 10% iii) Return on Capital Employed (ROCE) Net profit x 100Capital employed [Capital employed = Fixed Assets + Current Assets - Current Liabilities]. -do- � iv) Return on Proprietors fund Profit after taxProprietor's funds -do- � v) Return on Capital Profit after tax less pref. Dividend x 100Equity Share Capital -do- � vi) Earnings per share [EPS] Profit after tax less pref. DividendTotal No. of Equity Shares -do- � vii) Dividend per share [DPS] Total Dividend paid to ordinary shareholdersNumber of ordinary shares Shareholders, Investors � Management efficiency i) Stock Turnover Cost of goods soldAverage Stock Management 5 to 6 times ii) Debtors Turnover Ratio Debtors + Bills receivable x 365Net Credit sales Management 45 to 60 days iii) Debtor's Turnover Rate Credit salesAvg. Debtors + Bills receivable Management 60 to 90 days iv) Creditor's Turnover Ratio Creditors + Bills payable x 365Credit purchases -do- v) Creditor's Turnover Rate Credit purchasesAverage Creditors vi) Operating Ratio Operating Costs x 100Net sales [Operating Cost = Cost of goods sold + Operating expenses (viz. Administrative, selling & finance expenses)] Number of times preference dividends covered by net profit Preference shareholders' coverage ratio Net profit (after Interest & Tax but before equity dividend)Preference Dividend Preference shareholders Number of times equity dividends covered by net profit Equity shareholder's coverage ratio Net profit (after interest, tax & Pref. Dividend)Equity Dividend Equity shareholders Number of times fixed interest covered by net profit Interest coverage ratio Net profit (before Interest & Tax) (PBIT)Fixed interests & charges Debentureholders, Loan creditors Relationship between net profit and total fixed charges Total coverage ratio Net profit (before Interest & Tax) (PBIT)Total fixed charges Shareholders, investors, creditors, lenders The idle capacity in the Organisation Fixed expenses to total cost ratio Fixed expensesTotal cost Management shareholders Material consumption to sales Material consumption to sales ratio Material consumptionSales Management Wages to sales Wages to sales ratio WagesSales Management The future market price of a share Price earning ratio Market price of a share (MPS)Earnings per share (EPS) Investors, speculators	"

Thanks prakash they are well presented and definitely useful to all CA students

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bijaya (Accounts) (20 Points)
Replied 04 August 2008

i have left CA intermediate(result don't know) since may 1999.can i continue now ? My Old registration number is CC028475 & new is ERO0065465

(Guest)

i would like to have teaching material

on accounting ratios , anlaysis of B/s and annual reports

and some basic principles of accounting,specifics

related to insurance industry

(Guest)

Proprietor's unsecured loan treated can treated as quasi equity if yes please give me accounting standard

(Guest)

Wether Proprietor unsecured loan treated as quasi equity if yes give Accounting Standard

(Guest)

Good

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Bhavana (Student) (20 Points)
Replied 06 October 2008

Accounting ratio

(Guest)

plz tell me..are these two ratios i.e. ROE and RONW are the same or diff.?

As ROE = (PAT - Pref. div)/Avg. equity

Does Equity comprises of pref. equity or it only comprises of common equity?

and what all net worth is made up of???

CA CS CIMA Prakash Somani (Landmark Group) (23512 Points)
Replied 22 July 2009

Thnx :)

CA CS Amit Borade (Chief Accountant) (2828 Points)
Replied 22 July 2009

Hi all ...... all this ratios in Excel sheet...

Attached File : 55 ratio analysis.xls downloaded: 242 times

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satyanarayana (profession) (22 Points)
Replied 24 August 2009

Originally posted by :Guest
"	Good job...........with one lacuna......some body may not know the definition of terms used in these formulae.....so try to define the meaning/contents of every term used.....eg capital employeed ........mention what to be included nad what not.......	"