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Debt Ratio
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Debt Ratio = Total Debt / Total Assets
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measures the relative amount of company's assets that are financed by Debt
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High Debt Ratio = Higher financial risk
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Debt Equity Ratio
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D/E Ratio = Total Debt / Total Common Equity
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ratio of firm's total liabilities to Equity Capital
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High D/E Ratio indicates higher risk to the shareholders
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Equity Multiplier
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Equity Multiplier = Total Assets / Total Common Equity
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extent to which firm's assets are greater than the shareholder's equity
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If EM is 5, it means investment in total assets is 5 times the investment by Equity Shareholders
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Market Debt Ratio
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Market Debt Ratio = Total Debt / (Total Debt + Market Value of Equity)
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ratio between the market value of debt to the market value of debt and equity
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Liabilities to Assets Ratio
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LAR = Total Liabilities / Total Assets
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show the share of total liabilities out of total assets
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Interest Coverage Ratio
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ICR = Operating Income / Interest Expenses
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shows how easily a firm can pay its interest expenses
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Debt Service Coverage Ratio
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DSCR = Operating Income / Total Debt Service
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reveals how easily a firm can pay its debt obligations
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Current Ratio
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Current Ratio = Current Assets / Current Liabilities
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ratio of current assets and current liabilities. It measures the liquidity stand of a firm
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Ideal ratio is 2:1 or more. A low CR, say 0.5:1, means company has Rs.50 for every Rs.100 of debt and can't cover it short-term debts
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Quick Ratio
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Quick Ratio = Quick Assets / Current Liabilities
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also know as Acid Test Ratio
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Quick Ratio = (Current Assets - Inventories) / Current Liabilities
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a measure of short-term solvency of a firm
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Reliable because assets forming part of quick assets are easily convertible into cash in short notice. Quick ratio of 1:1 represents satisfactory financial situation
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Cash Ratio
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Cash Ratio = (Cash + Cash Equivalents) / Current Liabilities
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measures a firm's ability to pay off its short-term liabilities with cash and cash equivalents
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Operating Cash Flow Ratio
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OCFR = Operating Cash Flow / Current Liabilities
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measure of the number of times a firm can pay off its current liabilities with the cash generated in a given period
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Inventory Turnover Ratio
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ITR = Cost of Goods Sold / Inventory
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measures how firm's investment in inventory is being used to generate sales
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shows how rapidly inventory is turning into receivables through sales
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Days Sales Outstanding
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DSO = (Receivables x No. of days) / Total Credit Sales
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used to evaluate a firm's ability to collect its sales in timely manner
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It is a measure of quality of debtors as It shows the average length of time that a firm takes to realize in cash after credit sales has been made
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Receivables Turnover Ratio
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RTOR = Annual Credit Sales / Accounts Receivables
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indicates the no. of times the firm collects its account receivables during a year
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Higher RTOR, higher the efficiency of management assets
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Fixed Assets Turnover Ratio
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FATOR = Sales / Net Fixed Assets
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measures the effectiveness of a firm's ability to make efficient utilization of fixed assets
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High FATOR indicates efficient utilization of fixed assets in sales generation
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Total Assets Turnover Ratio
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TATOR = Sales / Total Assets
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measure of a firm's ability to make effective utilization of its total investment of generating sales revenue
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High TATOR indicates efficient utilization of total assets in sales generation
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Price Earnings Ratio
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PE Ratio = Market Price (per Share) / Earnings (per Share)
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Ratio of company's stock price to the earnings per share
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can only be calculated for listed companies. Higher PE ratio = higher growth rate of the firm
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Market to Book Value Ratio
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MBVR = Market Value (per Share) / Book Value (per Share)
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comparison of market value with book value of a firm
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IF MTBR<1, undervaluation; IF MTBR > 1, overvaluation;
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Dividends Per Share
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DPS = Total Dividends / No. of Shares
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total dividends shared per unit share
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Higher DPS = much profitable for shareholders
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Dividends Payout Ratio
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Payout Ratio = Dividends (per Share) / Earnings (per Share)
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the amount of divident that a company gives out to its shareholders out to its current earnings
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Dividend Yield Ratio
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DYR = Dividend (per Share) / Share Price
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measures the amount of dividends attributed to shareholders relative to the market value per share
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Net Profit Margin
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NPM = Net Income / Sales
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measures net income per Rupee of sales; it measures the operating efficiency
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Gross Profit Margin
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GPM = Gross Profit / Sales
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compares the gross profit to its net sales to show how much profit it makes after paying the cost of goods sold
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GPM = (Sales - Cost of goods sold) / Sales
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High GPM is a sign of good management efficiency to produce goods and services at low cost
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Earning Power Ratio
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EPR = Operating Profit / Total Assets
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Return on Assets
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RoA = Net Income / Total Assets
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Return on Equity
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RoE = Net Income / Total Equity
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