Accounting Ratios
Asset/Inventory Management
Creditors' Payment Period (aka Payables Turnover): Creditors (aka Accounts Payable) divided by purchases on credit multiplied by 365 (the result gives an average period in days of how long it takes to make payment)
Debtors' Collection Period (aka Receivables Turnover): Debtors (aka Accounts Receivable) divided by sales on credit multiplied by 365 (the result gives an average period in days of how long it takes to make payment)
Fixed Asset Turnover Ratio: (Sales less direct costs) divided by fixed assets
Inventory Ratio: Cost of goods sold (COGS) divided by average stock on hand. The figures are taken for a particular period of time, and the result gives an indication of how many times the inventory was turned over during that period.
Rate of Stock Turnover: Cost of sales (COS) divided by average stock held during the year
Total Asset Turnover Ratio: (Sales less direct costs) divided by total assets
Financial/Investment
Capital Gearing Ratio: (Preference share capital plus debentures plus long term loans) divided by (equity share capital plus reserves) multiplied by 100
Dividend Cover: Profits available for dividends divided by dividends
Dividend Yield: Ordinary dividend divided by market price of ordinary share multiplied by 100
Earnings per Share (EPS): Net profit less preference dividend divided by number of issued ordinary shares
Equity (or Proprietor's) Ratio: Proprietor's capital divided by assets
Interest Cover: Profits reserved for interest payments divided by interest
Price/Earnings Ratio (P/E): Market price of ordinary share divided by earnings per share (EPS)
Liquidity
Acid Test Ratio (aka Quick Asset Ratio): (Current assets less inventory and pre-paid expenses) divided by current liabilities
Borrowing Ratio: Borrowings divided by equity
Current Ratio (aka Working Capital Ratio): Current assets divided by current liabilities
Leverage
Debt Assets Ratio: Liabilities divided by assets
Debt Equity Ratio: Liabilities divided by equity
Profitablity
Gross Profit Margin: (Sales less direct costs) divided by sales multiplied by 100
Gross Profit Ratio: Gross profit margin multiplied by 100
Net Profit Margin: Net profit before tax divided by sales
Net Profit Ratio: Net profit margin multiplied by 100
Operating Profit Ratio: (Profit divided by (sales less sales related costs and expenses)) multiplied by 100
Return on Assets (ROA): Net income divided by fixed assets
Return on Capital Employed (ROCE): Net profit before interest and taxation (EBIT) divided by capital employed at the start of the year (ie. assets less debtors)
Return on Owners Equity (ROOE): Net profit before interest, tax and preference share dividends divided by owners equity at the start of the year (ordinary issued share capital plus all reserves)
Return on Investment (ROI): Net profit divided by capital employed
Return on Net Assets (RONA): Net income divided by (fixed assets plus net working capital). This is a measure of a company's performance. The higher the value, the better the performance.
