Accounting-Ratio formulas

Question 1

price earnings ratio:

Answer 1

market price per share
earnings per share

Question 2

dividend per share:

Answer 2

ordinary dividend
number of ordinary shares isssued

Question 3

interest cover:

Answer 3

profit before interest and tax
interest expense

Question 4

debt equity ratio:

Answer 4

debt
shareholder’s funds (equity)

Question 5

dividend cover:

Answer 5

net profit after tax and pref shares
ordinary dividend

Question 6

dividend yield:

Answer 6

dividend per share
market value of one ordinary share x100

Question 7

gearing:

Answer 7

loans + debentures + pref shares
capital employed

Question 8

return on ordinary shareholder’s funds:

Answer 8

net profit-preference dividends
shareholdersfunds

Question 9

gross profit:

Answer 9

gross profit
——————————– x100
sales (turnover)

Question 10

current ratio:

Answer 10

current assets
current liabilities

Question 11

stock (days):

Answer 11

inventory (average) x365
cost of sales

Question 12

payables days (creditors):

Answer 12

creditors x 365
credit purchases

Question 13

return on capital employed:

Answer 13

profit before interest and tax x100
capital employed

Question 14

operating profit:

Answer 14

operating profit
sales (turnover)

Question 15

acid test ratio:

Answer 15

current assets-closing stock
current liabilities

Question 16

receivables days (days):

Answer 16

receivables x365
sales (turnover)

Question 17

earnings per share:

Answer 17

net profit -preference dividend x100
no.of ordinary shares issued