Account8

Earning per Equity share (EPS): it shows the amount of earnings attributable to each equity share.

Formula:

Profits available for Equity shareholders

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Number of Equity shares

Dividend yield ratio: it shows the rate of return to shareholders in the form of dividends based in the market price of the share.

Formula:

Dividend per share

---------------------------- X100

Market price per share

Price earnings ratio: it a measure for determining the value of a share. May also be used to measure the rate of return expected by investors.

Formula:

Market price of share

(MPS)

------------------------------------X 100

Earnings per share (EPS)

Current ratio: it measures short-term debt paying ability.

Formula:

Current Assets

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Current Liabilities

Debt-Equity Ratio: It indicates the percentage of funds being financed through borrowings; a measure of the extent of trading on equity.

Formula: Total Long-term Debt

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Shareholders’ funds

Fixed Assets ratio: This ratio explains whether the firm has raised adequate long-term funds to meet its fixed assets requirements.

Formula: Fixed Assets

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Long-term Funds

Quick Ratio: The ratio termed as ‘liquidity ratio’. The ratio is ascertained y comparing the liquid assets to current liabilities.

Formula:

 Liquid Assets

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Current Liabilities

Stock turnover Ratio: The ratio indicates whether investment in inventory in efficiently used or not. It, therefore explains whether investment in inventory within proper limits or not.

Formula: cost of goods sold

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Average stock

Debtors Turnover Ratio: The ratio the better it is, since it would indicate that debts are being collected more promptly. The ration helps in cash budgeting since the flow of cash from customers can be worked out on the

basis of sales.

Formula: Credit sales

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Average Accounts Receivable

Creditors Turnover Ratio: It indicates the speed with which the payments for credit purchases are made to the creditors.

Formula: Credit Purchases

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Average Accounts Payable

Working capital turnover ratio: It is also known as Working Capital Leverage Ratio. This ratio indicates whether or not working capital has been effectively utilized in making sales.

Formula: Net Sales

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Working Capital

Fixed Assets Turnover ratio: This ratio indicates the extent to which the investments in fixed assets contribute towards sales.

Formula: Net Sales

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Fixed Assets

Pay-outs Ratio: This ratio indicates what proportion of earning per share has been used for paying dividend.

Formula:                            Dividend per Equity

Share

--------------------------------------------X100

Earning per Equity share

Overall Profitability Ratio: It is also called as “Return on Investment” (ROI) or Return on Capital Employed (ROCE). It indicates the percentage of return on the total capital employed in the business.

Formula:                      Operating profit

------------------------X 100