Financial Ratios

Financial Ratios Accounting Ratios for Financial Statement Analysis

Liquidity Analysis Ratios

Current Ratio

		Current Assets
	Current Ratio =	------------------------
		Current Liabilities

Quick Ratio

		Quick Assets
	Quick Ratio =	----------------------
		Current Liabilities

Quick Assets = Current Assets - Inventories

Net Working Capital Ratio

		Net Working Capital
	Net Working Capital Ratio =	--------------------------
		Total Assets

Net Working Capital = Current Assets - Current Liabilities
Profitability Analysis Ratios
Return on Assets (ROA)

		Net Income
	Return on Assets (ROA) =	----------------------------------
		Average Total Assets

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

Return on Equity (ROE)

		Net Income
	Return on Equity (ROE) =	--------------------------------------------
		Average Stockholders' Equity

Average Stockholders' Equity = (Beginning Stockholders' Equity + Ending Stockholders' Equity) / 2

Return on Common Equity (ROCE)

		Net Income
	Return on Common Equity =	--------------------------------------------
		Average Common Stockholders' Equity

Average Common Stockholders' Equity = (Beginning Common Stockholders' Equity + Ending Common Stockholders' Equity) / 2

Profit Margin

		Net Income
	Profit Margin =	-----------------
		Sales

Earnings Per Share (EPS)

		Net Income
	Earnings Per Share =	---------------------------------------------
		Number of Common Shares Outstanding

Activity Analysis Ratios

Assets Turnover Ratio

		Sales
	Assets Turnover Ratio =	----------------------------
		Average Total Assets

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

Accounts Receivable Turnover Ratio

		Sales
	Accounts Receivable Turnover Ratio =	-----------------------------------
		Average Accounts Receivable

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

Inventory Turnover Ratio

		Cost of Goods Sold
	Inventory Turnover Ratio =	---------------------------
		Average Inventories

Average Inventories = (Beginning Inventories + Ending Inventories) / 2

Capital Structure Analysis Ratios

Debt to Equity Ratio

		Total Liabilities
	Debt to Equity Ratio =	----------------------------------
		Total Stockholders' Equity

Interest Coverage Ratio

		Income Before Interest and Income Tax Expenses
	Interest Coverage Ratio =	-------------------------------------------------------
		Interest Expense

Income Before Interest and Income Tax Expenses = Income Before Income Taxes + Interest Expense

Capital Market Analysis Ratios

Price Earnings (PE) Ratio

		Market Price of Common Stock Per Share
	Price Earnings Ratio =	------------------------------------------------------
		Earnings Per Share

Market to Book Ratio

		Market Price of Common Stock Per Share
	Market to Book Ratio =	-------------------------------------------------------
		Book Value of Equity Per Common Share

Book Value of Equity Per Common Share = Book Value of Equity for Common Stock / Number of Common Shares

Dividend Yield

		Annual Dividends Per Common Share
	Dividend Yield =	------------------------------------------------
		Market Price of Common Stock Per Share

Book Value of Equity Per Common Share = Book Value of Equity for Common Stock / Number of Common Shares

Dividend Payout Ratio

		Cash Dividends
	Dividend Payout Ratio =	--------------------
		Net Income

ROA = Profit Margin X Assets Turnover Ratio

ROA = Profit Margin X Assets Turnover Ratio

		Net Income	Net Income	Sales
	ROA =	------------------------  =	--------------  X	------------------------
		Average Total Assets	Sales	Average Total Assets

Profit Margin = Net Income / Sales Assets Turnover Ratio = Sales / Averages Total Assets

Ratio Analysis:

	Operating Efficiency ratio =Non Intt. Expense/Total Revenues
Equity to Asset Ratio= Total Share Holder’s Equity/Total Asset	Provission for loan loss(%)=Provission for loan loss/ Advance
Net Interest Income=Intt. Income - Intt Expenses	Burden(%)= Net Profit/EBT or Net profit/(Net profit+Reserve Fund)
Net Non-Interest Income=Total Non Intt Income -Total Non Intt Exp	NIAT = Total Revenue – Total Expenses = (Intt  Income + Non Intt  Income) – (Intt Exp + Non Intt Exp)
NIM= Net intt. Income/Net intt. Asset

Expected/Required rate of return for Asset:

E(R_i)= RFR + β_i(R_M - RFR)                       where,     RFR=Risk free return, R_M= Market return, β_i= Beta co efficient

                                                                                R_M – RFR = Market Risk Premium        

Calculate the change of Equity:

DGAP= DA – (MVL/MVA)* DL                               DGAR=Duration of GAP, DA=Duration of Asset DL=Duration of   Liabilities

TA=Total Asset, ∆i=Change of intt , y=Intt rate

∆MVE= (-DGAP)*∆i/(1+y)*TA                               ∆MVE=Change of market value of equity

β_p = β_AW_A+β_BW_B ….                                                                    β_p= Portfolio Beta, W_A= Invest in com. Of A/Total investment