HSC Financial Analysis All Formulas
1. Profitability Ratios
These ratios show how well a company generates profit compared to its sales or assets.
Gross Profit Margin
Gross Profit Margin = (Gross Profit / Sales) * 100 - Measures profit from selling goods after covering production costs.
Net Profit Margin
Net Profit Margin = (Net Profit / Sales) * 100 - Shows how much net income a company earns from its sales.
Operating Profit Margin
Operating Profit Margin = (Operating Profit / Sales) * 100 - Assesses profit from operations alone, ignoring taxes and interest.
Return on Sales (ROS)
Return on Sales = (Operating Profit / Net Sales) * 100 - Shows how efficiently a company turns sales into profit.
2. Liquidity Ratios
Liquidity ratios assess a company ability to pay its short-term debts.
Current Ratio
Current Ratio = Current Assets / Current Liabilities - Indicates whether a company can cover its short-term debts with current assets.
Quick Ratio (Acid-Test Ratio)
Quick Ratio = (Current Assets - Inventory) / Current Liabilities - Measures the ability to meet short-term obligations without selling
inventory.
Cash Ratio
Cash Ratio = Cash and Cash Equivalents / Current Liabilities - Shows the ability to pay short-term debts with cash only.
3. Activity (Efficiency) Ratios
These ratios indicate how well a company uses its assets.
Inventory Turnover Ratio
Inventory Turnover = Cost of Goods Sold / Average Inventory - Shows how quickly a company sells its inventory.
Receivables Turnover Ratio
Receivables Turnover = Net Credit Sales / Average Accounts Receivable - Measures how fast a company collects money from
customers.
Accounts Payable Turnover Ratio
Accounts Payable Turnover = Net Credit Purchases / Average Accounts Payable - Shows how quickly a company pays its suppliers.
Asset Turnover Ratio
Asset Turnover = Sales / Total Assets - Indicates how efficiently a company uses its assets to generate sales.
Fixed Asset Turnover Ratio
Fixed Asset Turnover = Net Sales / Net Fixed Assets - Shows how well a company uses its fixed assets to produce sales.
4. Leverage (Solvency) Ratios
Leverage ratios reveal a company financial stability and debt levels.
Debt-to-Equity Ratio
Debt-to-Equity = Total Liabilities / Shareholders Equity - Compares the company debt to its equity.
Debt Ratio
Debt Ratio = Total Liabilities / Total Assets - Shows the percentage of assets financed by debt.
Equity Ratio
Equity Ratio = Total Equity / Total Assets - Indicates the portion of assets financed by shareholders.
Interest Coverage Ratio
Interest Coverage = EBIT / Interest Expense - Measures how easily a company can pay interest on its debt.
Financial Leverage Ratio
Financial Leverage = Total Assets / Total Equity - Indicates how much of the company assets are funded by equity.
5. Market Ratios
Market ratios assess the value of a company stock and its potential for growth.
Earnings Per Share (EPS)
EPS = Net Income / Outstanding Shares - Shows the profit earned for each share of stock.
Price-to-Earnings Ratio (P/E Ratio)
P/E Ratio = Market Price per Share / Earnings per Share - Compares the price of a stock to its earnings.
Dividend Yield
Dividend Yield = (Dividend per Share / Market Price per Share) * 100 - Shows the return a shareholder earns from dividends.
Book Value per Share
Book Value per Share = Total Shareholders Equity / Outstanding Shares - Measures the net asset value per share.
Dividend Payout Ratio
Dividend Payout = (Total Dividends / Net Income) * 100 - Shows what percentage of net income is paid as dividends.
6. Return Ratios
Return ratios measure the efficiency of investment in a company.
Return on Assets (ROA)
ROA = (Net Income / Average Total Assets) * 100 - Indicates how profitable a company is relative to its total assets.
Return on Equity (ROE)
ROE = (Net Income / Average Shareholders Equity) * 100 - Measures how effectively equity is generating profits.
Return on Investment (ROI)
ROI = (Net Profit / Investment Cost) * 100 - Shows the profitability of an investment.
Return on Capital Employed (ROCE)
ROCE = (EBIT / Capital Employed) * 100 - Assesses the efficiency of capital investment.
7. Additional Financial Formulas
These formulas are used to analyze working capital, earnings, and capital employed.
Working Capital
Working Capital = Current Assets - Current Liabilities - Shows the company ability to cover short-term debts.
Earnings Before Interest and Taxes (EBIT)
EBIT = Net Income + Interest Expense + Taxes - Measures profit from core operations before interest and taxes.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization - Shows operational profitability without non-cash expenses.
Capital Employed
Capital Employed = Total Assets - Current Liabilities - Represents the total capital used in the business.
