1.
Current Ratio= Current Assets / Current Liabilities; 2:1
Current Asset =Cash in hand +Cash in bank +A/R+ Sundry debtors
+Bill/note receivable+
Work in progress++Finished goods+ Merchandise inventory +Short
term investment +Marketable securities +Advanced payment + Prepaid
expense +Accrued revenue
Current liabilities= Bank overdraft + A/P + Sundry creditors+ Bills and
notes payable+ Expense payable+ Accrued expenses + Outstanding
liabilities + Payable tax+ Advance from customers
2. Quick or Acid test Ratio= Quick Asset/ Quick Liabilities; 1:1
Quick Asset= Current Asset- Inventory -Prepaid expense
Quick Liabilities= Current liabilities -Bank over draft
3. Super Quick Ratios= (Cash + Marketable securities) / Current
Liabilities
4. Inventory Turnover Ratio= Cost of goods Sold/ Average inventory;
8 times
Average Inventory = (Opening inventory + Closing Inventory)/ 2
5. Accounts Receivable Turnover Ratio= Net credit Sales/ Average
Accounts receivable
Average A/R= (Opening Accounts receivable + Closing Accounts
receivable) /2
6. Accounts Payable Turnover Ratio= Net credit Purchase/ Average
Accounts payable
Average A/P= (Opening Accounts Payable + Closing Accounts
Payable) /2
7. Gross Profit Ratio= (Gross Profit /Net sales) * 100 ;20%-30%
8. Net Profit Ratio= (Net Profit /Net sales) * 100 ;5%-10%
9. Net Profit Margin= (Net Income/Net sales) * 100
10. EPS= Net income / No of common Share
11. Working Capital or Net Working Capital= Current Asset – Current
Liabilities
12. Working Capital Ratio= Working Capital / Current Liabilities
13. Average Collection Period= 365/ Accounts receivable turnover
14. Debt equity Ratio= Total Debt/ Shareholder’s Fund
Total Debt = Long term + Current debt
15. Debt to total capital ratio = Long term Debt / (Shareholder fund
+ long term debt) ;1:4
16. Debt to Total Asset ratio= Total Debt / Total Asset; (1:2 to 1:3)
17. Proprietary Ratio= Owners fund / Total Asset; 3:4
18. Capita Gearing Ratio= (Debenture or Debt / Capital fund) * 100
;1:2
19. Price earing Ratio= Market price per share of stock/ EPS
20. Payment Ratio= (Cash Dividend / Net income) * 100
Cash Dividend= Opening Retain earnings + Net income – Closing
Retain earnings
