| Short–term Financial Position or Test of Liquidity | |
| (a) Current Ratios | = Current AssetsCurrent Liabilities |
| (b) Quick or Acid Test or Liquid Ratio | = Liquid AssetsCurrent Liabilities |
| (c) Absolute Liquid Ratio | = Absolute Liquid AssetsCurrent Liabilities |
| (d) Interval Measure | = Liquid AssetsAvg.Daily Operating Expenses |
| Current Assets Movement (Asset Management Ratios) | |
| (a) Inventory /Stock Turnover Ratio | =Cost of Goods SoldAvg.Inventory at Cost |
| (b) Debtors or receivables Turnover Ratio/Velocity | =Net Credit Annual SaleAvg.Trade Debtors |
| (c) Average Collection Period | =Total Trade DebtorsSale per Day |
| (d) Creditors / Payable Turnover Ratio / Velocity | =Net Credit Annual PurchaseAvg.Trade Creditors |
| (e) Average Payment Period | =Total Trade Creditos / PayableAvg.Daily Purchase |
| (f) Working Capital Turnover Ratio | =Sales or Cost of SalesNet Working Capital |
| Analysis of Long-term Financial Position or Test of Solvency | |
| (a) Debt Equity Ratio | =Outsiders FundsShareholders′ Fundsor=Outsiders′ EquitiesInternal Equities |
| (b) Funded Debt to Total Capitalization Ratio | =Funded DebtsTotal Capitalization × 100 |
| (c) Ratio of Long term Debt to Shareholders, Funds (Debt Equity) | =Long term DebtsShareholders′ Funds |
| (d) Proprietary or Equity Ratio | =Shareholders FundsTotal Assets |
| (e) Solvency Ratio | =Total Liabilities to OutsidersTotal Assets |
| (f) Fixed Assets Net Worth Ratio | =Fixed Assets after DepreciationShareholders′ Funds |
| (g) Fixed Assets Ratio or Fixed Assets to Long Term Funds | =Fixed Assets after DepreciationTotal long term Fund |
| (h) Ratio of Current Assets to Proprietary funds | =Current AssetsShareholders′ Funds |
| (i) Debt-Service or Interest Coverage | =Net Profit (before Int. & Taxes)Fixed Interest Charges |
| (j) Total Coverage or Fixed Charge Coverage | =EBITTotal Fixed Charges |
| (k) Preference Dividend Coverage Ratio | =Net Profit (before Int.& Tax)Preference Dividend |
| (l) Cash to debt-Service Ratio or Debt Cash Flow Coverage | =CF1 +SFD1 − Tax RateCF = Annual cash flow before Int. & TaxSFD = Sinking fund appropriation on debt |
| Analysis of Profitability | |
| (i) General Profitability: | |
| (a) Gross Profit Ratio | =Gross ProfitNet Sale × 100 |
| (b) Operating Ratio | =Operating CostNet Sale × 100 |
| (c) Expenses Ratio | =Particular ExpenseNet Sale × 100 |
| (d) Net Profit Ratio | =Net Profit after TaxNet Sale × 100 |
| (e) Operating Profit Ratio | =Operating ProfitNet Sale × 100 |
| Overall Profitability | |
| (a) Return on Shareholders’ Investment (RoI) | =Net Profiti after Tax & InterestShareholders′ Fund × 100 |
| (b) Return on Equity Capital | =Net Profit after Tax − Pref.DividendPaid up Equity Capital × 100 |
| (c) Earnings per Share (EPS) | =Net Profit after Tax − Pref.DividendNumber of Equity Share × 100 |
| (d) Return on Gross Capital Employed | =Adjusted Net ProfitGross Capital Employed × 100 |
| (e) Return on Net Capital Employed | =Adjusted Net ProfitNet Capital Employed × 100 |
| (f) Return on Assets | =Net Profit after TaxAvg.Total Assets × 100 |
| (g) Capital Turnover Ratio | =Sale or Cost of SaleCapital Employed × 100 |
| (h) Fixed Assets Turnover Ratio | =Sale or Cost of Goods SoldFixed Assets × 100 |
| (i) Working Capital Turnover Ratio | =Sale or Cost of Goods SoldNet Working Capital × 100 |
| Market Test or Valuation Ratio | |
| (a) Dividend Yield Ratio | =Dividend per ShareMarket Value per Share |
| (b) Dividend Payout Ratio | =Dividend per Equity ShareEarnings per Share |
| (c) Price/Earnings (P/E) Ratio | =Market Price per Equity ShareEarnings per Share |
| (d) Earning Yield Ratio | =Earnings per ShareMarket price per share |
| (e) Market Value Book Value Ratio | =Market value per shareBook value per share |
| (f) Market Price to Cash Flow Ratio | =Market price per shareCash flow per share |
| Market Test or Valuation Ratio | |
| (a) Capital Gearing Ratio | =Equity Share Capital + Reserve & SurplusPref.Capital + Long term Debt bearing Fixed Interest |
| (b) Total Investment to Long Term Liabilities | =Shareholders Fund + Long term LiabilitiesLong term Liabilities |
| (c) Debt Equity Ratio | =Outsiders FundsShareholders Funds |
| (d) Ratio to Fixed Assets to Funded Debt | =Fixed AssetsFunded Debts |
| (e) Ratio of Current Liabilities to Proprietors fund | =Current LiabilitiesShareholders′ Funds |
| (f) Ratio of Reserve to Equity Capital | =ReservesEquity Share Capital × 100 |
| (g) Financial Leverage | =EBITEBIT − Interest & Pref.Dividend |
| (h) Operating Leverage | =ContributionEBIT |
Management Accounting – Useful Ratios
J. BoomiNathan is a writer at SenseCentral who specializes in making tech easy to understand. He covers mobile apps, software, troubleshooting, and step-by-step tutorials designed for real people—not just experts. His articles blend clear explanations with practical tips so readers can solve problems faster and make smarter digital choices. He enjoys breaking down complicated tools into simple, usable steps.
Leave a review Leave a review
