Ratio Analysis: Profitability Ratio:

Gross Profit :
The Gross Profit ratio measures the relationship of gross profit to net sales and is usually expressed as percentage. This ratio is calculated by dividing gross profit by sales. Gross profit ratio represents the excess of what the concern is able to charge as sale price over the cost of good sold.

Groos Profit Ratio

Gross Profit Sales

Net Profit :
Net Profit establish the ratio between net profit and sales, and indicates the efficieny of the management in manufacturing, selling, administrative and other activity of the firm. It gives the measures of net inome generated by firms each rupee of sales. This ratio gives over all measures of profitability.

Net Profit Ratio

Net Profit Sales

Return on Equity :

ROE is related to ROA through the interest expense to average asset ratio and a leverage ratio. One can determine the impact of firms operations ROE of changes in leverage as well as changes in and efficiency.

Return on Equity Ratio =

Net Income Preference dividend Equity

EPS : Earning Per Share is good measures of profitability. The EPS when compered with the similar companies EPS gives a view of the comparative earning or earning power of the firm. EPS when power helps calculated for a number of years indicates whether earning of the company has increased over the years or not. Its also in calculating market price of the share.

Earning Per Share =

Profit after tax No. of Shares

Book Value Per Share :

Book value of shares is publishes in most of the annual reports. Book value indicates the amount of shareholders equity that intrinsic shareholders relates to each share of outstanding equity stock. It is the value of the share and is obtained by dividing the funds with number of equity shares.

Book value per share =

Total shareholder's fund - preference share No. of equity shares

Liquidity Analysis :

The term liquidity refers to the firms ability to pay its liability in the short run. This is also known as short term solvency. Liquidity strength of the so as to maintain sound compared with short term ratio are calculated to determine the relative concern in meeting its current obligations, liquidity. Short term obligations are recourses for calculating ratio.

Current Ratio : This is the most important liquidity ratio. It indicates the firms ability to pay its current liability out of his current assets. It shows current the extent of Margins of safety or cushion available to creditors.

Current Ratio =

Current Assets Current Liabilities

Activity Analysis

Activity analysis indicates the efficency in the use of capital employed in the business. Turnover ratios are calculated to analyze this efficiency the efficiency of companys operations i.e. activities. Thus ratio indicate the assets liquidity and asset management of the business.

Working Capital Ratio : Working capital turn over ratio indicates the number of times the working capital is turned over in the course of year. It measures the firm. A capital. But a efficiency with which the working capital is being used by higher ratio indicates efficient utilization of working very high ratio is not good for any firm. This ratio

can be used for different forms in

making a comparative and trend analysis for same industry and for various periods. Sales Avg. Working Capital

Working Capital Ratio =

Dividend Payout Ratio :

The ratio measures what a company pays out to their investors in form of dividends. This is the ratio between dividend and earnings. share being whole or paying dividends and expansion, then the chances Hence, a share holder looking for company whose dividend pay out is high appropriation looks for company whose pay It indicates the position of current earning per common paid out dividends. This ratio is very important from the shareholders point of view. If a company pays substantially the whole of his earnings for retains nothing for future growth and of capital appreciation are dim. quick returns looks for and looking for capita out is low.

Dividend Payout Ratio =

Dividend PAT

Debt Equity Ratio : The ratio determines the soundness of the long term financial policies of the company and also measures the relative investment in the equity ratio. proportions of the outsiders and shareholders fund company. It is also known as Internal External

Debt Equity Ratio =

Long term debts Shareholder's fund

Ideal ratio is 1:2. A low ratio is favorable from the creditors point of view and is unfavourable from the investors point of view.

General Remarks :

In this section, we are looking for the financial position of the company and based on that we will be selecting the one to which by which its own financial we calculate is the best one. Ratios are the powerful tools we can judge the financial position of the company. It has limitations but its gives good view of the companys position.