Ratio analysis

Question 1

Current Ratio

Answer 1

Current asset / Current liabilities

Question 2

Quick ratio

Answer 2

Quick assets / current liabilities

Question 3

Quick assets

Answer 3

Current assets - Advance tax - Prepaid expense - Inventories

Question 4

Debt equity ratio

Answer 4

Long term debts [Non current liabilities] / Shareholder funds[Share capital + reserves and surplus]

Question 5

Debt to total assets ratio

Answer 5

Long term debts / Total assets {Non current + current assets Or liabilities}

Question 6

Proprietary ratio

Answer 6

Equity / Total assets

Question 7

Gross profit ratio

Answer 7

Gross profit / revenue from operations x 100

Question 8

Gross profit

Answer 8

Revenue from operations - cost of operations

Question 9

Cost of revenue operations (COGS)

Answer 9

Opening inventory + purchases + direct expenses - closing inventory

OR

Revenue from operations - gross profit

Question 11

Interest coverage ratio

Answer 11

PBIT / interest

Question 12

Inventory turnover ratio

Answer 12

Cost of revenue from operations/ average inventory

Question 13

Average inventory

Answer 13

Opening stock + closing stock by 2

Question 14

Average age of inventory/BR/creditors

Answer 14

365 divided by inventory/BR/creditors turnover ratio

Question 15

Trade receivable turnover ratio

Answer 15

Credit revenue from operations(credit sales) / average trade receivable

Question 16

Trade payables turnover ratio

Answer 16

Net credit purchase/average trade payable

Question 17

Working capital turnover ratio

Answer 17

Revenue from operations( sales)/ working capital

Question 18

Operating ratio

Answer 18

Cost of revenue from operations + operating expenses - operating income

DIVIDED BY

Revenue from operations

Question 19

Operating expenses

Answer 19

Employee benefit expenditure, selling expense, depreciation and amortization expense, bad debts, interest on short term loan

Question 20

Operating income

Answer 20

Trading commission and cash discount received

Question 21

Net profit ratio

Answer 21

Net profit after tax / revenue from operations

Question 22

Operating profit ratio

Answer 22

Operating profit / revenue from operations x 100

Question 23

Operating profit

Answer 23

Gross profit - operating expense + operating income

Question 24

Earning per share

Answer 24

Net profit after tax, dividend on preference shares

DIVIDED by

Number of equity shares

Question 25

P.E ratio

Answer 25

Market price of the equity shares

DIVIDED BY

E.P.S

Question 26

Return on investment

Answer 26

Net profit before interest, tax and dividend

DIVIDED by

Capital employed

Question 27

Capital employed

Answer 27

Shareholders fund+ non current liabilities - non trade investment

OR

Non current assets + working capital

OR

Fixed assets + trade investment+ working capital