Ratios And Their Formulas Flashcards
Net profitability ratios/ sales ratio
Profit after tax ÷ net sales x 100
Gross profit ability ratio
Gross profit ÷ net sales x 100
Or
Net sales - the cost of goods sold ÷ net sales x100
Operating profitability ratio
Profit before interest and tax ÷ net sales x 100
Notes regarding profitability ratios
We will divide all the profit ratios by net sales
Concept of capital employed
Assets= capital + liabilities
Capital employed = NCA +ca-cl
Capital employed= equity + lt debts
So
Equity +lt debts = NCA + ca- cl
Return on capital employed ( ROCE)
profit before interest and tax ÷avg capital employed × 100
Return on the ordinary share capital/ return on equity
Profit after tax - preference share dividend ÷ avg ordinary shareholder equity x 100
Return on assets
Profit before interest and tax ÷ avg total assets x 100
Asset turnover
Net sales ÷ avg of total assets/ avg of capital employed
Debtor days/ debtor days turnover
Avg debtors ÷ credit sales x 365
Inventory days/ inventory turnover days
Avg inventory ÷ cost of sales x 365
Creditor days/ creditor days turnover
Avg creditors/cost of sales ÷ credit purchases x 365
Debtor turnover
Credit sales÷ avg debtor = times
Inventory turnover
Cost of sales ÷ avg of inventory= times
Credit turnover
Credit purchases ÷ avg of creditor =times
