Category Ratio Ideal Significance

Liquidity
Current Ratio 2 Position for a
year.

Liquidity
Liquid/Quick/Acid Test Ratio 1 Position for a
Liquidity and quarter.
Solvency
Liquidity
Absolute Liquid Ratio/Cash Ratio/Super Quick 1 Position for a
month.
% of Cash to
Cash to Total Assets Ratio Total Assets
Interval Measure (No. of Days) 60 No of days Co. can run without any further c
Contribution
of
Proprietary Ratio shareholders
in each rupee
of asset.
Equity Ratio Proportion of Owners fund in Total capital E
Capital Debt Ratio Proportion of Debt fund in Total capital Emp
Structure
Ratios A Co. can
borrow upto
Debt Equity Ratio/Leverage Ratio 2 twice of its
shareholders
fund.
Fixed Assets Ratio % of CE invested in FA and it should not be >
Capital Gearing Ratio 2 Proportion of fixed interest/dividend bearing
Gross Profit to
Gross Profit Ratio Sales.

Net Profit to
Net Profit Ratio Sales.

Operating Ratio % of expenses to sales (100-Operating profit

Profits from
principal
Operating Profit Ratio business
activities.
Profitability
Ratios % return on
Return on Investment(ROI)/Capital Employed (ROCE) total capital
employed.

% return to a
equity
Return on Equity(ROE)/Equity Shareholders fund shareholder on
funds
invested.

% return to
shareholders
Return on Shareholders fund on funds
invested.
Preference shareholders’ coverage ratio Sufficiency of PAT to meet preference divide
Equity shareholder’s coverage ratio Sufficiency of EAESH to meet equity dividend
Coverage
Ratios
 Coverage Interest coverage  ratio Sufficiency of profits to meet interest obligati
Ratios Total coverage ratio Sufficiency of profits to meet fixed charges o

Debt Service Coverage Ratio 2 It Indicates how much sufficient are compan
its loan obligations.
Fixed expenses to total cost ratio Indicates the Idle capacity in the organizatio
Material consumption to sales ratio
Wages to sales ratio
Creditor’s Payment Period

Time lag
between credit
Creditor’s Turnover Ratio purchases &
payment.

Debtor’s Collection Period

It measures
how rapidly
Debtors Turnover Ratio debtors are
collected.

Turnover No. of times of

Ratios turnover to
Capital Employed Turnover Ratio capital
employed.

Working Capital Turnover Ratio Efficiency of Working Capital utilized in busin

Fixed Assets Turnover Ratio Extent to which FA have contributed toward
Total Assets Turnover Ratio Ability to generate sales per rupee of Total A
Finished Goods(Stock) Turnover Ratio Indicates how fast FG are sold.
Finished Goods(Stock) Holding Period

Level of WIP in
WIP Turnover Ratio production
process.

Indicates
Raw Material Turnover Ratio turnover of
RM.
Price Earning Ratio MP of Share for every Re.1 of earning per sh
Earnings per share [EPS] Shows earning capacity & dividend paying ca
Uncommitted Earnings per share [UEPS] EAESH after providing for DRR.
Diluted Earnings per Share [DEPS]
Other Ratios Dividend per share [DPS] A short term Investor looks for DPS, while LT
Payout Ratio % of earnings distributed as dividend.
Retention Ratio % of earnings retained by a Co.
Dividend Yield % dividend to a shareholder on MPS.
Earnings Yield/Cost of Equity (Ke) % return to a shareholder on MPS.

Notes
1 Logic behind ideal current ratio of 2:1 is conservatism. It means CA should be double of CL, as CA are subjec
decline in MV of Non-trade investments, etc.
a Following should be excluded from Current Assets while calculating Current ratio:
● Purchase of inventory to create buffer stock in anticipation of import restrictions, etc.
● Cash received by taking Long term loan at the end of year for purpose of capital expenditure.
 ● Disputed Debtors.
● Obsolete & Non-moving stock .
● Readily saleable stock should be included at its market value instead of cost price.
b Following should be included in Current Liabilities while calculating Current ratio:
● Overdue long term borrowings & Long term borrowings approaching maturity within one year.
● Creditors discharged at the end of year by sale of some long term investments should be increased to the e

2 Quick assets are current assets realizable within a period of 2 or 3 months.

● Quick assets does not include stock & prepaid expenses as these are realizable in kind only.
● However if stock is easily saleable in cash it should be included in quick assets.
● If Debtors are realizable after a considerable period of time, it should be excluded.
● Quick liabilities are current liabilities except short Bank borrowings, because practically it is more long term

3 Cash reservoir = Cash in Hand + Balance at bank + Marketable Non-Trade Investments.

● Non-Trade Investments means investments held for short term cash management.
● Marketable investments are those which can be easily converted into cash, like quoted and regularly traded
● Trade Investments are those which are held for the purpose of trade.

4 Cash reservoir = Cash in Hand + Balance at bank + Marketable Non-Trade Investments.

● Total Assets means total of assets side of Balance Sheet including intangible assets but excluding fictitious a
● Book Value of Non-Trade Investments is replaced by Current Market value.

5 Cash reservoir = Cash in Hand + Balance at bank + Marketable Non-Trade Investments.

● Average Daily Cash Expenditure = (COGS + Administrative + Selling & Distribution Expenses)/360

6 Proprietary Fund = Shareholders fund = Net Worth = Paid up Equity Capital + Paid up Preference Capital + R
● Total Assets = Total of Assets Side - Fictitious assets (Losses & Miscellaneous Expenditure)

7 Debt = All Long Term Borrowings (Secured & Unsecured)

● Equity = Proprietary Fund = Shareholders fund = Net Worth = Paid up Equity Capital + Paid up Preference Ca
● Equity ≠ Equity Shareholders Fund.

8 Fixed Cost Funds = Preference Share Capital + Long term Debts

● Funds Not Carryin Fixed Cost = Equity Shareholders Fund = Paid up Equity Capital + Reserves & Surplus - Los

9 Net profit = Operating Profit + Non operating Profit - Non Operating Expenses.
● Non operating Profit includes Interest & Dividend on Non Trade Investments, Profit on sale of Fixed Assets,

10 Other Operating Expenses include Administrative, Selling & Distribution expenses.

11 Operating Profit Ratio can be improved by:

● Increase in GP Ratio.
● Reduction in Administrative, Selling & Distribution expenses.
● Increase in Capacity Utilization.

12 EBIT = Operating Profit + Interest on Long term Borrowings + Provision for taxation (for pre-tax ROI)
● Capital employed = Equity Capital + Preference Capital + Reserves & Surplus + Long Term Borrowings - Non
● Intangible Assets should be included in the Capital Employed but Fictitious Assets should be excluded.
 ● Average Capital Employed = (Opening Capital + Closing Capital)/2
= Opening Capital + 1/2 of Profit
= Closing Capital - 1/2 of Profit

13 Shareholders fund = Equity = Proprietary Fund = Net Worth = Paid up Equity Capital + Paid up Preference Ca

14 Total Fixed Charges = Interest + Preference Dividend

15 Profits available for Debt Servicing = Profit After Tax + Non Cash Expenses + Interest on Long Term Borrowin

16 Average Creditors = (Opening Creditors + Closing Creditors)/2

● Creditors include Bills Payable also.

17 Average Debtors = (Opening Debtors + Closing Debtors)/2

● Debtors include Bill Receivables also.

18 Capital employed = Equity Capital + Preference Capital + Reserves & Surplus + Long Term Borrowings - Non
● Intangible Assets should be included in the Capital Employed but Fictitious Assets should be excluded.
● Average Capital Employed = (Opening Capital + Closing Capital)/2
= Opening Capital + 1/2 of Profit
= Closing Capital - 1/2 of Profit

19 Fictitious Assets should be excluded from Fixed Assets.

 High Low Formula
High WC, over Low WC Under
capitalization, more capitalization, Less
Liquidity, Less Liquidity, More Current Assets/Current Liabilities
profitability profitability

High Liquidity, Less Less Liquidity, High

Profitability profitability Quick Assets/Current Liabilities

High Liquidity, Less Less Liquidity, High

Profitability profitability Cash Reservoir/Current Liabilities

High Liquidity, Less Less Liquidity, High

Profitability profitability Cash Reservoir/Total Assets
of days Co. can run without any further cash inflow. Cash Reservoir/Average daily Cash Exp.

Higher proportion of Lower proportion of

Owner's fund in Total Owner's fund in Total
Assets of the Company, Assets of the Company, Proprietary (Shareholders) fund/Total Tangible Assets
Lower Debt-Equity ratio. Higher Debt-Equity ratio.

oportion of Owners fund in Total capital Employed Equity shareholders fund/Total Capital Employed
oportion of Debt fund in Total capital Employed Debt Fund/Total Capital Employed
If ROI is sufficient to Indicates cautitious
cover Interest, then attitude of ompany,
Equity shareholders will which may result in Debt/Equity
have advantage of lower return to equity
trading on Equity. shareholders.
of CE invested in FA and it should not be > 1 (Fixed Assets+Trade Inv. )/Capital Employed
oportion of fixed interest/dividend bearing capital to ESHF. Fixed Cost Funds/Funds not carrying Fixed Cost
Effective utilization of High COGS, ineffective
resources, Low COGS. utilization of resources. Gross Profit/Sales

High OP ratio or if low Low OP ratio or if high

OPR, then due to high OPR, then due to low
NO Profit or Low NO NO Profit or high NO Net Profit/Sales
expenses. expenses.
of expenses to sales (100-Operating profit ratio). (COGS + Other Operating Exp.)/Sales
Low ROI & if Low OP
High ROI, high GP ratio. ratio is along with high Operating Profit/Sales
SP, Co. must reduce its
overheads.

High capital employed Low capital employed

turnover ratio & high turnover ratio & low EBIT/Average Capital Employed
operating profit ratio. operating profit ratio.

ROE > after tax ROI, ROE < after tax ROI,
company's before tax company's before tax
ROI is higher than rate ROI is less than rate of EAESH/Equity Shareholders fund
of Interest & trading on
equity. Interest.

PAT/Shareholders fund

fficiency of PAT to meet preference dividend obligations. PAT/Preference Dividend

fficiency of EAESH to meet equity dividend obligations. EAESH/Equity Dividend
 fficiency of profits to meet interest obligations. EBIT/Interest
fficiency of profits to meet fixed charges obligations. (PAT + Interest)/Total Fixed Charges
ndicates how much sufficient are company's earnings to serve
loan obligations. Profit available for Debt Servicing/(Principal+Interest)

dicates the Idle capacity in the organization. Fixed Expenses/Total Cost

Material Consumption/Sales
Wages/Sales
360 days or 12 months/Creditors Turnover ratio

Higher Credit Period,

Lower credit period.
Credibility of Company. Credit Purchases/Average Creditors

360 days or 12 months/Debtors Turnover ratio

Indicates a shorter credit Longer credit period or

period or better Inefficient collection Credit Sales/Average Debtors(before provision)
collection policy. policy.

Better utilization of
capital, increased Over-capitalization,
profitability, over-
trading, under- under-trading & reduced Turnover(Net Sales)/Average Capital Employed
profitability.
capitalization & reduced
liquidity.

fficiency of Working Capital utilized in business. Turnover/Working Capital

ent to which FA have contributed towards Sales. Turnover/Fixed Assets(after depreciation)
ility to generate sales per rupee of Total Assets. Turnover/Total Assets(Less Preliminary Exp.)
dicates how fast FG are sold. COGS/Average stock of FG
360 days or 12 months/FG Turnover Ratio
Lower level of WIP,
lower processing period High level of WIP, lower
& High level of level of production & Cost of production/Average stock of WIP
high processing period.
production.

Lower stock of RM & Higher stock of RM &

Low liquidity High liquidity. RM Consumed/Average Stock of RM

P of Share for every Re.1 of earning per share. MPS/EPS

ows earning capacity & dividend paying capacity of a Co. EAESH/No. of Equity Shares
ESH after providing for DRR. (EAESH - Transfer to Sinking Fund)/No. of Equity Shares
EAESH/(No. of Equity Shares+Potential Equity Shares)
hort term Investor looks for DPS, while LTI for EPS. Dividend Declared/No. of Equity shares
of earnings distributed as dividend. DPS/EPS
of earnings retained by a Co. (EPS-DPS)/EPS
dividend to a shareholder on MPS. DPS/MPS
eturn to a shareholder on MPS. EPS/PS

ould be double of CL, as CA are subject to shrinkage in value due to various reasons like bad debts, obsolete inventory, unexpected

urrent ratio:
restrictions, etc.
e of capital expenditure.
of cost price.
urrent ratio:
maturity within one year.
estments should be increased to the extent of such of payment.

ealizable in kind only.

be excluded.
ecause practically it is more long term than long term loans.

ade Investments.
management.
cash, like quoted and regularly traded investments.

ade Investments.
ngible assets but excluding fictitious assets.

ade Investments.
Distribution Expenses)/360

apital + Paid up Preference Capital + Reserve & Surplus - Losses & Miscellaneous Expenses.
aneous Expenditure)

Equity Capital + Paid up Preference Capital + Reserve & Surplus - Losses & Miscellaneous Expenses.

uity Capital + Reserves & Surplus - Losses & Miscellaneous Expenses.

tments, Profit on sale of Fixed Assets, etc. and Non-Operating expenses include loss on sale of assets.

on expenses.

n for taxation (for pre-tax ROI)

urplus + Long Term Borrowings - Non Trade Investments - Miscellaneous Expenditure & Losses.
tious Assets should be excluded.
 pital + Closing Capital)/2
pital + 1/2 of Profit
tal - 1/2 of Profit

Equity Capital + Paid up Preference Capital + Reserve & Surplus - Losses & Miscellaneous Expenses.

nses + Interest on Long Term Borrowings

urplus + Long Term Borrowings - Non Trade Investments - Miscellaneous Expenditure & Losses.
tious Assets should be excluded.
pital + Closing Capital)/2
pital + 1/2 of Profit
tal - 1/2 of Profit
Notes

4
5

10

11

12

13
 14

15

16

17

18

19

nventory, unexpected
Ratio Significance High
Liquidity High WC, over
Current Ratio / 𝐶𝐴/𝐶𝐿 Position for a
capitalization, more
Working Capital Ratio year. Liquidity, Less
profitability

((𝐶𝐴 - 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦))/𝐶𝐿 Liquidity

High Liquidity, Less
Liquid/Quick/Acid Test Ratio Position for a Profitability
quarter.

(𝐶𝑎𝑠ℎ 𝑎𝑛𝑑 𝑐𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠)/𝐶𝐿 Liquidity

Absolute Liquid Ratio/Cash Position for a High Liquidity, Less
Ratio/Super Quick month. Profitability

(𝐶𝑎𝑠ℎ 𝑅𝑒𝑠𝑒𝑟𝑣𝑜𝑖𝑟)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠) % of Cash to High Liquidity, Less

Cash to Total Assets Ratio Total Assets
"Type equation
Profitability
here."

(𝐶𝑎𝑠ℎ 𝑅𝑒𝑠𝑒𝑟𝑣𝑜𝑖𝑟)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑑𝑎𝑖𝑙𝑦 𝑐𝑎𝑠ℎ 𝑒𝑥𝑝.)

Interval Measure (No. of Days) No of days Co. can run without any further cash inflow.

𝐶𝐴/(𝐷𝑎𝑖𝑙𝑦 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)

Defensive Interval Ratio

Defensive assets - Non-cash charges how many days a company can operate without having to
access non-current or LT assets
Contribution
of Higher proportion of
(𝑃𝑟𝑜𝑝𝑟𝑖𝑒𝑡𝑎𝑟𝑦 (𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠) 𝑓𝑢𝑛𝑑)/(𝑇𝑜𝑡𝑎𝑙 𝑇𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐴𝑠𝑠𝑒𝑡𝑠) Owner's fund in Total
Proprietary Ratio shareholders Assets of the Company,
in each rupee Lower Debt-Equity ratio.
of asset.
(𝐸𝑆𝐻 𝐹𝑢𝑛𝑑)/(𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)
Equity Ratio Proportion of Owners fund in Total capital Employed

(𝐷𝑒𝑏𝑡 𝐹𝑢𝑛𝑑 )/(𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)

Debt Ratio Proportion of Debt fund in Total capital Employed

A Co. can If ROI is sufficient to

Debt-to-Equity Ratio 𝐷𝑒𝑏𝑡/𝐸𝑞𝑢𝑖𝑡𝑦 borrow upto cover Interest, then
(D/E Ratio) twice of its Equity shareholders will
Financial Leverage shareholders have advantage of
fund. trading on Equity.
((𝐹𝐴+𝑇𝑟𝑎𝑑𝑒 𝐼𝑛𝑣.))/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)
Fixed Assets Ratio % of CE invested in FA and it should not be > 1

(𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 𝐹𝑢𝑛𝑑𝑠)/(𝐹𝑢𝑛𝑑𝑠 𝑛𝑜𝑡 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐹𝐶)

Capital Gearing Ratio Proportion of fixed interest/dividend bearing capital to ESHF.

𝑁𝑃/𝑅𝑒𝑣𝑒𝑛𝑢𝑒× 𝑅𝑒𝑣𝑒𝑛𝑢𝑒/(𝑇𝑜𝑡𝑎𝑙
DuPont Formula ROE = NP Margin x Asset Turnover x Financial Leverage
𝐴𝑠𝑠𝑒𝑡𝑠) × (𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)/𝐸𝑞𝑢𝑖𝑡𝑦
Earning before interest and Revenue - Operating expenses + Non-operating exps
after taxes
Earning Retention Ration /
1 - Dividend Payout Ratio
Plowback Ratio

(𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔)/(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)

Earnings Retention Ratio

Effective Rate of Return ( 1 + i/n)n-1

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)/(𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒)

Operating Expense Ratio

( 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 (𝑅𝑒𝑣𝑒𝑛𝑢𝑒))

Operating Margin Ration
(Operating Income Margin,
Return on sales)

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)/(( 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑁𝑒𝑡 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑛𝑐𝑜𝑚𝑒+𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒)

Overhead Ratio
 𝐶𝑀/𝑆𝑎𝑙𝑒𝑠×100
Profit Volume Ratio %

Profitability Index (PI) / (𝑃𝑉 𝑜𝑓 𝐼𝑛𝑓𝑙𝑜𝑤)/(𝑃𝑉 𝑜𝑓 𝑂𝑢𝑡𝑓𝑙𝑜𝑤)

Benefit-cost Ratio

Absolute return reached by asset - Return reached by

Relative Return
benchmark

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝑇𝑜𝑡𝑎𝑙 (𝑜𝑟 𝐴𝑣𝑒𝑟𝑎𝑔𝑒) 𝐴𝑠𝑠𝑒𝑡𝑠)

Return on Assets ( ROA )

Return on Average Assets (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑠𝑠𝑒𝑡𝑠)

( ROAA)

Return on Average Capital 𝐸𝐵𝐼𝑇/(( 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 −𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝐿 ))

Employed

Return on Average Equity (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟𝑠^′ 𝐸𝑞𝑢𝑖𝑡𝑦)

(ROAE)

Return on capital employed 𝐸𝐵𝐼𝑇/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)

(ROCE)

𝐸𝐵𝐼𝑇/(( 𝐸𝑞𝑢𝑖𝑡𝑦+𝑁𝑜𝑛 𝐶𝐿 ))

𝐸𝐵𝐼𝑇/(( 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 −𝐶𝐿 ))

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝐿𝑇 𝐷𝑒𝑏𝑡)

Return on Debt ( ROD )

Return on Equity ( ROE ) (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝑆𝐻^′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦)

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝐻^′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦)

Return on Invested Capital 𝑁𝑂𝑃𝐴𝑇/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡)

( ROIC )

Capital Investment Total Assets - Excess Cash - Non Interest bearing CL

((𝐺𝑎𝑖𝑛𝑠 - 𝐶𝑜𝑠𝑡))/(𝐶𝑜𝑠𝑡 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡)

Return on Investment ( ROI )

(𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)

Return on Net assets (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/(( 𝐹𝐴+𝑁𝑒𝑡 𝑊𝐶 ))

( RONA )

Return on Research Capital (𝐶𝑌 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡)/(𝑃𝑌 𝑅 & 𝐷 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒)

( RORC )

(( 〖𝐸𝑃𝑆〗 _𝑛 − 〖𝐸𝑃𝑆〗 _1))/(∑24_1^𝑛▒ 〖𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔〗 )

Return on Retained Earning
( RORE )
the extent to which the previous year profits were reinvested
High OP ratio or if low
Return on Revenue ( ROR ) / 𝑁𝑃/𝑆𝑎𝑙𝑒𝑠 Net Profit to OPR, then due to high
Net Profit Margin Sales. NO Profit or Low NO
expenses.

Return on Sales ( ROS ) / 𝐸𝐵𝐼𝑇/𝑆𝑎𝑙𝑒𝑠

Operating Profit Margin
 (𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)/(𝑁𝑜. 𝑜𝑓 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒𝑠)
Revenue per employee

((𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 −𝑅_𝑓))/𝜎_𝑝

Sharpe Ratio Higher the better

(𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡)/𝑆𝑎𝑙𝑒𝑠 Gross Profit to Effective utilization of

Gross Profit Ratio Sales. resources, Low COGS.

((𝐶𝑂𝐺𝑆+𝑂𝑡ℎ𝑒𝑟 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝.))/𝑆𝑎𝑙𝑒𝑠

Operating Ratio % of expenses to sales (100-Operating profit ratio).

([(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 - 𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐴𝑠𝑠𝑒𝑡𝑠) - ( 𝐶𝐿 - 𝑆𝑇 𝐷𝑒𝑏𝑡𝑠)])/(𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑂𝑏𝑙𝑖𝑔𝑎𝑡𝑖𝑜𝑛𝑠)

Asset Coverage Ratio

(𝐿𝑇 𝐷𝑒𝑏𝑡)/(( 𝐿𝑇 𝐷𝑒𝑏𝑡+𝑆𝐻^′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 ))

Capitalization Ratio

(𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐷𝑒𝑏𝑡 𝑠𝑒𝑟𝑣𝑖𝑐𝑖𝑛𝑔)/(( 𝑃+𝐼 )) It Indicates how much sufficient are company's earnings to serve
Debt Service Coverage Ratio its loan obligations.

(𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝐷𝑒𝑏𝑡 𝑝𝑎𝑦𝑚𝑒𝑛𝑡)/(𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝐼𝑛𝑐𝑜𝑚𝑒)

Debt-to-Income Ratio

𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠/𝐸𝐵𝐼𝑇𝐷𝐴
Debt / EBITDA Ratio

Equity Multiplier (𝑇𝑜𝑡𝑎𝑙 1/(𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜)

𝐴𝑠𝑠𝑒𝑡𝑠)/(𝑆𝐻^′
𝑠 𝐸𝑞𝑢𝑖𝑡𝑦)
Equity Ratio / (𝑆𝐻'𝑠 𝐹𝑢𝑛𝑑 𝑜𝑟 𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠) 1/𝐸𝑀
Net worth to Total Assets Ratio

(𝑁𝑜𝑛−𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡)/(𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ)

Non-current asset to Net
Worth /
Fixed Assets to Net worth Ratio (𝑁𝑒𝑡 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡)/(𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ)

((𝐸𝐵𝐼𝑇+𝑓𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥))/(𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+𝑓𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥)

Fixed Charge Coverage Ratio

𝐸𝐵𝐼𝑇/𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Interest coverage  ratio Sufficiency of profits to meet interest obligations.

(𝐿𝑇 𝐷𝑒𝑏𝑡)/(( 𝐿𝑇 𝐷𝑒𝑏𝑡+𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑆𝑡𝑜𝑐𝑘+𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑐𝑘 ))

LT Debt to Capitalization Ratio

(𝑇𝑜𝑡𝑎𝑙 𝐹𝑢𝑛𝑑 𝐶𝑜𝑠𝑡𝑠)/(𝑇𝑜𝑡𝑎𝑙 𝐹𝑢𝑛𝑑 𝐴𝑠𝑠𝑒𝑡𝑠)

Total expense Ratio ( TER )

Preference shareholders’ 𝑃𝐴𝑇/(𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑)

Sufficiency of PAT to meet preference dividend obligations.
coverage ratio

Equity shareholder’s coverage 𝐸𝐴𝐸𝑆𝐻/(𝐸𝑞𝑢𝑖𝑡𝑦 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑)

Sufficiency of EAESH to meet equity dividend obligations.
ratio

(( 𝑃𝐴𝑇+𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 ))/(𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒𝑠)

Total coverage ratio Sufficiency of profits to meet fixed charges obligations.

Days Payable O/s (DPO) / (360 𝑑𝑎𝑦𝑠 𝑜𝑟 12 𝑚𝑜𝑛𝑡ℎ𝑠)/(𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜)

Creditor’s Payment Period

Accounts Payable Turnover Time lag

(𝐶𝑟𝑒𝑑𝑖𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠) between credit Lower credit period.
Ratio / purchases &
Creditor’s Turnover Ratio payment.
 (360 𝑑𝑎𝑦𝑠 𝑜𝑟 12 𝑚𝑜𝑛𝑡ℎ𝑠)/(𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜)
Debtor’s Collection Period /
Days Sales O/s ( DSO )

(𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠 (𝑏𝑒𝑓𝑜𝑟𝑒 𝑝𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛)) It measures Indicates a shorter credit

Debtors Turnover Ratio / how rapidly period or better
Receivable Turnover Ratio debtors are collection policy.
collected.

𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟/(𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 ( 𝑎𝑓𝑡𝑒𝑟 𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 ))

Fixed Assets Turnover Ratio Extent to which FA have contributed towards Sales.

Assets Turnover Ratio / 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠) or in days = Ability to generate sales per rupee of Total Assets.
Total Assets Turnover Ratio 365/(𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟)

((𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 - 𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙

Capacity Utilization Ratio / 𝑂𝑢𝑡𝑝𝑢𝑡))/(𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡)
Operating Ratio ×100

Cash Conversion Cycle or DIO + DSO - DPO

Operating Cycle

𝐶𝑂𝐺𝑆/(𝐴𝑣𝑒𝑟𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦)
Inventory Turnover Ratio Indicates how fast FG are sold.

Finished Goods(Stock) Holding (360 𝑑𝑎𝑦𝑠 𝑜𝑟 12 𝑚𝑜𝑛𝑡ℎ𝑠)/(𝐹𝐺 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜)

Period

(𝐶𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘 𝑜𝑓 𝑊𝐼𝑃) Lower level of WIP,

Level of WIP in lower processing period
WIP Turnover Ratio production & High level of
process.
production.

(𝑅𝑀 𝐶𝑜𝑛𝑠𝑢𝑚𝑒𝑑)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘 𝑜𝑓 𝑅𝑀)

Indicates
Lower stock of RM &
Raw Material Turnover Ratio turnover of
Low liquidity
RM.

𝑀𝑃𝑆/𝐸𝑃𝑆
MP of Share for every Re.1 of earning per share.

Price Earning Ratio

(𝑀𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 )/(𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥𝑒𝑠 𝑎𝑛𝑑 𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠)

(𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)/(𝑅 & 𝐷 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠)

Price to Research Ratio

(𝑆𝑡𝑜𝑐𝑘 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒)/(𝑆𝐻'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒))

Price / Book value Ratio

(𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)/(𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)

Price / Sales Ratio

((𝐴𝑠𝑠𝑒𝑡𝑠 - 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 + 𝐹𝑢𝑡𝑢𝑟𝑒 𝐸𝑎𝑟𝑛𝑖𝑛𝑔))/(𝑁𝑜. 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠)

Stock Price

𝐸𝐴𝐸𝑆𝐻/(𝑁𝑜. 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠)

Earnings per share [EPS] Shows earning capacity & dividend paying capacity of a Co.

Uncommitted Earnings per ((𝐸𝐴𝐸𝑆𝐻 - 𝑇𝑟𝑎𝑛𝑠𝑓𝑒𝑟 𝑡𝑜 𝑆𝑖𝑛𝑘𝑖𝑛𝑔 𝐹𝑢𝑛𝑑))/(𝑁𝑜. 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠) EAESH after providing for DRR.
share [UEPS]
(𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝐷𝑒𝑐𝑙𝑎𝑟𝑒𝑑)/(𝑁𝑜. 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠)
Dividend per share [DPS] A short term Investor looks for DPS, while LTI for EPS.

𝐷𝑃𝑆/𝐸𝑃𝑆
Dividend Payout Ratio % of earnings distributed as dividend.

Retention Ratio ((𝐸𝑃𝑆−𝐷𝑃𝑆))/𝐸𝑃𝑆 % of earnings retained by a Co.

𝐷𝑃𝑆/𝑀𝑃𝑆
Dividend Yield % dividend to a shareholder on MPS.
(𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑌𝑖𝑒𝑙𝑑)/(𝐶𝑜𝑠𝑡 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦(𝑘_(𝑒)) ) 𝐸𝑃𝑆/𝑃𝑆 % return to a shareholder on MPS.

Enterprise Value ( EV ) Market capitalization + Debt + Preferred Share Capital +

Minority Interest - Cash and cash equivalents

Enterprise Value Multiple = (𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒

EBITDA Multiple 𝑉𝑎𝑙𝑢𝑒)/𝐸𝐵𝐼𝑇𝐷𝐴

Gordon Growth Model Price of 𝐷_1/(𝑘_𝑒−𝑔)

stock

(𝑀𝑜𝑟𝑡𝑔𝑎𝑔𝑒 𝐴𝑚𝑜𝑢𝑛𝑡)/(𝐴𝑝𝑝𝑟𝑎𝑖𝑠𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦)

Loan to Value Ratio

(𝑁𝑒𝑡 𝐴𝑠𝑠𝑒𝑡𝑠)/(𝑁𝑜. 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜/𝑠)

Net Asset value per share

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹𝑠)/(𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡𝑠)

Ability of a company to pay interest and principal amounts

Cash Flow Coverage Ratio when they become due
((𝑁𝑒𝑡 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 + 𝐴𝑚𝑜𝑟𝑡𝑖𝑧𝑎𝑡𝑖𝑜𝑛 ) )/(𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡)

Cash Flow Return on 𝐶𝐹/(𝑀𝑉 𝑜𝑓 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑) calculation that helps the stock market to set prices on the basis
Investment Ratio (CFROI) of CF

Cash Return on Capital 𝐸𝐵𝐼𝑇𝐷𝐴/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑) compares cash earned with money
Investment ( CROCI) invested

Free Cash Flow / Operating (𝐹𝑟𝑒𝑒 𝐶𝐹)/(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔

Cash flow Ratio 𝐶𝐹)×100%

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹)/(𝑆𝑎𝑙𝑒𝑠
Operating CF / Sales Ratio 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)×100% Company's ability to turn its sales into cash

(𝑀𝑉 𝑜𝑓 𝑐𝑜𝑚𝑝𝑎𝑛𝑦^′ 𝑠 𝑠ℎ𝑎𝑟𝑒)/(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒)

Price / Cash flow Ratio

((𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹 −𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠))/(𝐶𝑜𝑚𝑚𝑜𝑛 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜/𝑠)

Operating CF per share

 Low Ideal
Low WC Under
capitalization, Less
Liquidity, More 2
profitability

Less Liquidity, High

profitability 1

Less Liquidity, High

profitability 1

Less Liquidity, High

pe equation here."
profitability

hout any further cash inflow. 60

pany can operate without having to

on-current or LT assets
Lower proportion of
Owner's fund in Total
Assets of the Company,
Higher Debt-Equity ratio.

d in Total capital Employed

n Total capital Employed

Indicates cautitious
attitude of ompany,
which may result in 2
lower return to equity
shareholders.

d it should not be > 1

st/dividend bearing capital to ESHF. 2

t Turnover x Financial Leverage

previous year profits were reinvested
Low OP ratio or if high
OPR, then due to low
NO Profit or high NO
expenses.
 High COGS, ineffective
utilization of resources.

0-Operating profit ratio).

fficient are company's earnings to serve

2

eet interest obligations.

preference dividend obligations.

eet equity dividend obligations.

eet fixed charges obligations.

Higher Credit Period,

Credibility of Company.
 Longer credit period or
Inefficient collection
policy.

ontributed towards Sales.

er rupee of Total Assets.

Lower the CCC, the more

healthy a company
generally is

sold.

High level of WIP, lower

level of production &
high processing period.

Higher stock of RM &

High liquidity.

1 of earning per share.

dividend paying capacity of a Co.

DRR.

s for DPS, while LTI for EPS.

as dividend.

a Co.

er on MPS.
 on MPS.

o pay interest and principal amounts

n they become due

e stock market to set prices on the basis

of CF

Higher the better

lity to turn its sales into cash

 Ratio Remarks Ideal
Higher liquidity ratios,
Current Ratio / 𝐶𝐴/𝐶 higher M/S that company
𝐿 2
Working Capital Ratio meets its CL

((𝐶𝐴 - 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦))/𝐶𝐿
Liquid/Quick/Acid Test Ratio 1

extent to which readily

Absolute Liquid Ratio/ (𝐶𝑎𝑠ℎ 𝑎𝑛𝑑 𝑐𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠)/𝐶𝐿 available funds can pay 1
Cash Ratio/Super Quick CLs

(𝐶𝑎𝑠ℎ 𝑅𝑒𝑠𝑒𝑟𝑣𝑜𝑖𝑟)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)

Cash to Total Assets Ratio

(𝐶𝑎𝑠ℎ 𝑅𝑒𝑠𝑒𝑟𝑣𝑜𝑖𝑟)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑑𝑎𝑖𝑙𝑦 𝑐𝑎𝑠ℎ 𝑒𝑥𝑝.)

Interval Measure (No. of Days) 60

how many days a Co can operate

𝐶𝐴/(𝐷𝑎𝑖𝑙𝑦 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠) without having to access non-CA
or LT assets
Defensive Interval Ratio

Defensive assets - Non-cash charges

(𝑃𝑟𝑜𝑝𝑟𝑖𝑒𝑡𝑎𝑟𝑦 (𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠) 𝑓𝑢𝑛𝑑)/(𝑇𝑜𝑡𝑎𝑙 𝑇𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐴𝑠𝑠𝑒𝑡𝑠)

Proprietary Ratio

((𝐹𝐴+𝑇𝑟𝑎𝑑𝑒 𝐼𝑛𝑣.))/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)

Fixed Assets Ratio

ESHs Fund = Paid up

(𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 𝐹𝑢𝑛𝑑𝑠)/(𝐹𝑢𝑛𝑑𝑠 𝑛𝑜𝑡 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐹𝐶) = Equity Capital + R & S -
Capital Gearing Ratio (𝑃𝑆𝐶+𝐿𝑇 𝐷𝑒𝑏𝑡)/(𝐸𝑆𝐻𝑠 𝐹𝑢𝑛𝑑) 2
Losses & Misc Exp

Earning before interest and Revenue - Operating expenses + Non-operating exps

after taxes
Earning Retention Ration / 1 - Dividend Payout Ratio
Plowback Ratio

(𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔)/(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)

Earnings Retention Ratio

[1+ 𝑖/𝑚]^𝑚−1 Annualised Cost

Effective Rate of Return

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)/(𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒)

Operating Expense Ratio

Operating Margin Ratio ( 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 (𝑅𝑒𝑣𝑒𝑛𝑢𝑒))

(Operating Income Margin,
Return on sales)

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)/(( 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑁𝑒𝑡 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡

Overhead Ratio 𝐼𝑛𝑐𝑜𝑚𝑒+𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒))

𝐶𝑀/𝑆𝑎𝑙𝑒𝑠×100
Profit Volume Ratio %

Profitability Index (PI) / (𝑃𝑉 𝑜𝑓 𝐼𝑛𝑓𝑙𝑜𝑤)/(𝑃𝑉 𝑜𝑓 𝑂𝑢𝑡𝑓𝑙𝑜𝑤) =

Benefit-cost Ratio (𝑁𝑃𝑉+ 〖𝐶𝐹〗 _𝑜 )/ 〖𝐶𝐹〗 _𝑜

Relative Return Absolute return reached by asset - Return reached by

benchmark

21
 Ratio Remarks Ideal
Return on Average Assets (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑠𝑠𝑒𝑡𝑠) lowe ROAA - higher asset
( ROAA) intensity of company

Return on Average Capital 𝐸𝐵𝐼𝑇/(( 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 −𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝐿 ))

Employed

Return on Average Equity (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟𝑠^′ 𝐸𝑞𝑢𝑖𝑡𝑦)

(ROAE)

𝐸𝐵𝐼𝑇/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑) ROCE should always be higher

than rate at which Co borrows
Return on capital employed
(ROCE)
Capital Employed = Equity + Non CL = Total Assets - CL

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝐿𝑇 𝐷𝑒𝑏𝑡)

Return on Debt ( ROD )

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝑇𝑜𝑡𝑎𝑙 (𝑜𝑟 𝐴𝑣𝑒𝑟𝑎𝑔𝑒) 𝐴𝑠𝑠𝑒𝑡𝑠) (𝐸𝐴𝑇 𝑓𝑜𝑟

Return on Assets ( ROA ) 𝐸𝑆𝐻𝑠)/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙
𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)
(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝑆𝐻^′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦)

Return on Equity ( ROE )

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝐻^′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦)

ROE (DuPont Formula) 𝑁𝑃/𝑅𝑒𝑣𝑒𝑛𝑢𝑒× 𝑅𝑒𝑣𝑒𝑛𝑢𝑒/(𝑇𝑜𝑡𝑎𝑙 NP margin x Assets T/O x

financial leverage
𝐴𝑠𝑠𝑒𝑡𝑠) × (𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)/𝐸𝑞𝑢𝑖𝑡𝑦
Return on Invested Capital 𝑁𝑂𝑃𝐴𝑇/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡)
( ROIC )

Capital Investment Total Assets - Excess Cash - Non Interest bearing CL

((𝐺𝑎𝑖𝑛𝑠 - 𝐶𝑜𝑠𝑡))/(𝐶𝑜𝑠𝑡 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡)

Return on Investment ( ROI )

(𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)

(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/(( 𝐹𝐴+𝑁𝑒𝑡 𝑊𝐶 )) Higher RONA - Co. is using its

Return on Net assets assets and WC effectively &
( RONA ) efficiently

Return on Research Capital (𝐶𝑌 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡)/(𝑃𝑌 𝑅 & 𝐷 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒)

( RORC )

(( 〖𝐸𝑃𝑆〗 _𝑛 − 〖𝐸𝑃𝑆〗 _1))/(∑24_1^𝑛▒ 〖𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔〗 )

Return on Retained Earning
( RORE )

Increase in ROR - Co is
Return on Revenue ( ROR ) / 𝑁𝑃/𝑆𝑎𝑙𝑒𝑠 generating higher NI with lesser
Net Profit Margin exp.

Return on Sales ( ROS ) / 𝐸𝐵𝐼𝑇/𝑆𝑎𝑙𝑒𝑠

Operating Profit Margin

22
 Ratio Remarks Ideal
(𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)/(𝑁𝑜. 𝑜𝑓 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒𝑠)
Revenue per employee

Increase - its higher adjusted

((𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 −𝑅_𝑓))/𝜎_𝑝 performance is better
Sharpe Ratio

(𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡)/𝑆𝑎𝑙𝑒𝑠
Gross Profit Ratio

((𝐶𝑂𝐺𝑆+𝑂𝑡ℎ𝑒𝑟 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝.))/𝑆𝑎𝑙𝑒𝑠

Operating Ratio

([(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 - 𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐴𝑠𝑠𝑒𝑡𝑠) - ( 𝐶𝐿 - 𝑆𝑇 𝐷𝑒𝑏𝑡𝑠)])/(𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑂𝑏𝑙𝑖𝑔𝑎𝑡𝑖𝑜𝑛𝑠)

Asset Coverage Ratio 2

(𝐿𝑇 𝐷𝑒𝑏𝑡)/(( 𝐿𝑇 𝐷𝑒𝑏𝑡+𝑆𝐻^′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 ))

Capitalization Ratio

Debt Service Coverage Ratio (𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐷𝑒𝑏𝑡 𝑠𝑒𝑟𝑣𝑖𝑐𝑖𝑛𝑔)/(( 𝑃+𝐼 ))
2
( DSCR )

(𝐷𝑒𝑏𝑡 𝐹𝑢𝑛𝑑 )/(𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)

Debt Ratio

Debt-to-Equity Ratio 𝐷𝑒𝑏𝑡/𝐸𝑞𝑢𝑖𝑡𝑦

(D/E Ratio) 2
Financial Leverage
(𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝐷𝑒𝑏𝑡 𝑝𝑎𝑦𝑚𝑒𝑛𝑡)/(𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝐼𝑛𝑐𝑜𝑚𝑒)
Debt-to-Income Ratio

𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠/𝐸𝐵𝐼𝑇𝐷𝐴
Debt / EBITDA Ratio

Equity Multiplier (𝑇𝑜𝑡𝑎𝑙 1/(𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜) reflects extent of leverage used

𝐴𝑠𝑠𝑒𝑡𝑠)/(𝑆𝐻^′ by Co to finance its assets
𝑠 𝐸𝑞𝑢𝑖𝑡𝑦)
Equity Ratio / (𝑆𝐻'𝑠 𝐹𝑢𝑛𝑑 𝑜𝑟 𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ)/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠) 1/𝐸𝑀 (𝐸𝑆𝐻 𝐹𝑢𝑛𝑑)/(𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)
Net worth to Total Assets Ratio

(𝑁𝑜𝑛−𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡)/(𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ)

Non-current asset to Net
Worth /
Fixed Assets to Net worth Ratio (𝑁𝑒𝑡 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡)/(𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ)

((𝐸𝐵𝐼𝑇+𝑓𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥))/(𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+𝑓𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥)

Fixed Charge Coverage Ratio

Higher - better the position of

𝐸𝐵𝐼𝑇/𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 lender
Interest Coverage  ratio

(𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝑝𝑎𝑦𝑚𝑒𝑡𝑛 𝑜𝑓

Dividend Coverage Ratio 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑)/(𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 ( 𝐸𝑞𝑢𝑖𝑡𝑦 𝑜𝑟 𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 ))

declining trend - Co is over

𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟/(𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 ( 𝑎𝑓𝑡𝑒𝑟 𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 )) investing in P,P & E
Fixed Assets Turnover Ratio application of funds in form of
assets to generate sales

23
 Ratio Remarks Ideal
(𝐿𝑇 𝐷𝑒𝑏𝑡)/(( 𝐿𝑇 𝐷𝑒𝑏𝑡+𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑆𝑡𝑜𝑐𝑘+𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑐𝑘 ))
LT Debt to Capitalization Ratio

(𝑇𝑜𝑡𝑎𝑙 𝐹𝑢𝑛𝑑 𝐶𝑜𝑠𝑡𝑠)/(𝑇𝑜𝑡𝑎𝑙 𝐹𝑢𝑛𝑑 𝐴𝑠𝑠𝑒𝑡𝑠) cost include exp like legal fees,
Total expense Ratio ( TER ) mgmt fees, and other operational
exp.

Preference shareholders’ 𝑃𝐴𝑇/(𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑)

coverage ratio

Equity shareholder’s coverage 𝐸𝐴𝐸𝑆𝐻/(𝐸𝑞𝑢𝑖𝑡𝑦 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑)

ratio

(( 𝑃𝐴𝑇+𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 ))/(𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝑐ℎ𝑎𝑟𝑔𝑒𝑠)

Total coverage ratio

Days Payable O/s (DPO) / (360 𝑑𝑎𝑦𝑠 𝑜𝑟 12 𝑚𝑜𝑛𝑡ℎ𝑠)/(𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜)

Creditor’s Payment Period

Accounts Payable Turnover (𝐶𝑟𝑒𝑑𝑖𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠)

Ratio /
Creditor’s Turnover Ratio no. of times a Co. pays its
suppliers

Debtor’s Collection Period / (360 𝑑𝑎𝑦𝑠 𝑜𝑟 12 𝑚𝑜𝑛𝑡ℎ𝑠)/(𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜) Employee benefits are considered
Days Sales O/s ( DSO ) as a part of purchases

Debtors Turnover Ratio / (𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠 (𝑏𝑒𝑓𝑜𝑟𝑒 𝑝𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛))

how quickly Co collects o/s cash
Receivable Turnover Ratio balances from its customers

how efficiently mgmt is using

Assets Turnover Ratio / 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠) or in assets at its disposal to promote
Total Assets Turnover Ratio days = 365/(𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟) sales

provides with value of production

Capacity Utilization Ratio / ((𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 − 𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 capacity which is actually being
Operating Rate 𝑂𝑢𝑡𝑝𝑢𝑡))/(𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡) ×100 utilized over a specified period

time it takes to sell inventory &

Cash Conversion Cycle or DIO + DSO - DPO lower - more healthy collect receivables less time it
Operating Cycle takes to pay payables

𝐶𝑂𝐺𝑆/(𝐴𝑣𝑒𝑟𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦) GP is earned each time inventory

Inventory Turnover Ratio in turned over

Finished Goods(Stock) Holding (360 𝑑𝑎𝑦𝑠 𝑜𝑟 12 𝑚𝑜𝑛𝑡ℎ𝑠)/(𝐹𝐺 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜)

Period

(𝐶𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘 𝑜𝑓 𝑊𝐼𝑃)

WIP Turnover Ratio

(𝑅𝑀 𝐶𝑜𝑛𝑠𝑢𝑚𝑒𝑑)/(𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘 𝑜𝑓 𝑅𝑀)

Raw Material Turnover Ratio

𝑀𝑃𝑆/𝐸𝑃𝑆 how much the market is willing

to pay for a Co's earnings

Price Earning Ratio

P/E Ratio (𝑀𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 )/(𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥𝑒𝑠 𝑎𝑛𝑑 𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠)

24
 Ratio Remarks Ideal
(𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)/(𝑅 & 𝐷 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠)
Price to Research Ratio

(𝑆𝑡𝑜𝑐𝑘 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒)/(𝑆𝐻'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒))

low - good sign for banks &
Price / Book value Ratio insurance

(𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)/(𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)

Price / Sales Ratio

((𝐴𝑠𝑠𝑒𝑡𝑠 - 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 + 𝐹𝑢𝑡𝑢𝑟𝑒 𝐸𝑎𝑟𝑛𝑖𝑛𝑔))/(𝑁𝑜. 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠)

Stock Price

𝐸𝐴𝐸𝑆𝐻/(𝑁𝑜. 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠)

Earnings per share [EPS]

Uncommitted Earnings per ((𝐸𝐴𝐸𝑆𝐻 − 𝑇𝑟𝑎𝑛𝑠𝑓𝑒𝑟 𝑡𝑜 𝑆𝑖𝑛𝑘𝑖𝑛𝑔 𝐹𝑢𝑛𝑑))/

share [UEPS] (𝑁𝑜. 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠)

(𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝐷𝑒𝑐𝑙𝑎𝑟𝑒𝑑)/(𝑁𝑜. 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒𝑠)

Dividend per share [DPS]

((𝐸𝑃𝑆−𝐷𝑃𝑆))/𝐸𝑃𝑆
Retention Ratio b = 1 - D/P ratio

𝐷𝑃𝑆/𝑀𝑃𝑆
Dividend Yield

(𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑌𝑖𝑒𝑙𝑑)/(𝐶𝑜𝑠𝑡 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦(𝑘_(𝑒)) ) 𝐸𝑃𝑆/𝑃𝑆

measure value of Co's business

instead of value of Co
Enterprise Value ( EV ) Market capitalization + Debt + Preferred Share Capital +
Minority Interest - Cash and cash equivalents

better measure than P/E, lower

Enterprise Value Multiple = (𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 EV Multiple - indicative of
EBITDA Multiple 𝑉𝑎𝑙𝑢𝑒)/𝐸𝐵𝐼𝑇𝐷𝐴 undervaluation of a Co

Gordon Growth Model Price of 𝐷_1/(𝑘_𝑒−𝑔)

stock

(𝑀𝑜𝑟𝑡𝑔𝑎𝑔𝑒 𝐴𝑚𝑜𝑢𝑛𝑡)/(𝐴𝑝𝑝𝑟𝑎𝑖𝑠𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦)

Loan to Value Ratio

(𝑁𝑒𝑡 𝐴𝑠𝑠𝑒𝑡𝑠)/(𝑁𝑜. 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜/𝑠)

Net Asset value per share

very low ratio - indicative of too

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹𝑠)/(𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡𝑠) much debt or poor cash
generation
FCF can be used instead of
Cash Flow Coverage Ratio operating CFs
((𝑁𝑒𝑡 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 + 𝐴𝑚𝑜𝑟𝑡𝑖𝑧𝑎𝑡𝑖𝑜𝑛 ) )/(𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡)

Cash Flow Return on 𝐶𝐹/(𝑀𝑉 𝑜𝑓 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑)

Investment Ratio (CFROI)

Cash Return on Capital 𝐸𝐵𝐼𝑇𝐷𝐴/(𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑)

Investment ( CROCI)

25
 Ratio Remarks Ideal

Free Cash Flow / (𝐹𝑟𝑒𝑒 𝐶𝐹)/(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔

𝐶𝐹)×100% Higher the better
Operating Cash flow Ratio

(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹)/(𝑆𝑎𝑙𝑒𝑠
Operating CF / Sales Ratio 𝑅𝑒𝑣𝑒𝑛𝑢𝑒)×100%

(𝑀𝑉 𝑜𝑓 𝑐𝑜𝑚𝑝𝑎𝑛𝑦^′ 𝑠 𝑠ℎ𝑎𝑟𝑒)/(𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒) alternative to P/E ratio as it is

Price / Cash flow Ratio hard to manipulate

((𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝐹 −𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠))/(𝐶𝑜𝑚𝑚𝑜𝑛 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜/𝑠)

Operating CF per share

26