Financial RATIOS Analysis & FORMULAS

Profitability Ratios
(No. 4ii onwards Alvl)
1) Gross Profit Margin%  =		Gross Profit		X 100%
		Net Sales Revenue
2) Profit Margin % =		Net Profit		X 100%
		Net Sales Revenue
3) Percentage on expenses% =		Expenses		X 100%
		Net Sales Revenue
4i) Return on Equity% =		Net Profit		X 100%
(Assuming no dividends)		(Opening + Closing Equity) /2
4ii) Return on Equity% =		Net Profit aft Preference Dividends		X 100%
(Equity = Ordinary Shares +Reserves)		Equity
5) Mark-up on cost% =		Gross Profit		X 100%
		Cost of sales (COGS)
6) Operating Profit Margin% =		NPBI (Net Profit B4 Interest)		X 100%
		Net Sales Revenue
7) Return on total Assets% =		NPBI (Net Profit B4 Interest)		X 100%
		Total Assets
8) Return on LT Capital Employed =		NPBI (Net Profit B4     Interest)		X 100%
(Capital Employed =Assets-Liabilities + LTL)		Capital Employed

Liquidity Ratios (No. 3 onwards A lvl)
1) Working Capital/Current ratio=		Current Assets
		Current Liabities
2) Quick/ Acid test ratio=		Current Assets-Inventory-Prepayment
		Current Liabities
3) Debtors/AR Turnover (in days) =		Debtors		X 365     days
		Credit Sales
4) Creditors/AP Turnover (in days) =		Creditors		X 365 days
		Credit Purchases
5) Working Capital Cycle (in days)=		Debtor turnover + Inventory turnover - (Creditor turnover)
6) Debt to Equity ratio =		LTL
		Equity
7) Gearing ratio =		LTL+ Preference Shares
(Outside lenders / Owners' Capital)		Equity
Inventory Management
1) Inventory Turnover rate =		Cost of sales (COGS)
		(Opening + Closing Inventory) /2

Investment Ratio (Alvl)
1) Earning per share =		Net Profit- Preference Shares
		Number of shares
2) Price Earning/ PE ratio =		Market Price$/share
		Earning per share (1)
3) Dividend Yield =		Declared dividend/share
		Market Price$/share
4) Dividend Cover =		Profits paid to Ordinary Dividend$
		Ordinary Dividend paid$

Further Reading
http://www.bized.co.uk/compfact/ratios/index.htm
http://peregrin.imu.edu/~drakepp/principles/module2/fin_rat.pdf
Formulas can be found in O & A lvl syllabuses