ratio and vertical acs

8/8/2019 ratio and vertical acs

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PRESENTED BY :JAIN KHUSHMAT

CHANDYOKE AKSHI


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RatioMy bikes fuel has

a ratio of

oil to petrol

1 : 25Sounds

complicated


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Ratio?

Ratio is a way of comparing two or more

quantities

E.g. Number ofRed Smarties in a box compared to

Blue

Number of girls in a class compared to boys


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Count the number of red and green hearts 4 RED and 8 GREEN

Record the numbers using headings like this

Red : Green

4 : 8The :

says to


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Red : Green

4 : 8

2 : 4

1 : 2

Try to write the ratio in its

simplest terms

Divide by 2


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The ratio of red to greenis

Red : Green

1 : 2

This tells you that there

are 2 green hearts for

every red heart


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Copy and complete this chart

Ratio Simplest terms

12 : 16 3 : 4

24 : 32 3 : 4

27 : 36 3 : 4

28 : 40 7 : 10


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RATIO ANALYSIS

TYPES OF RATIO:

REVENUE RATIO

BALANCE SHEET RATIO

COMBINE RATIO


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REVENUE RATIO : If both amounts fromrevenue statement is known as revenueratio.

BALANCE SHEET RATIO : If both the amountsfrom balance sheet it will be termed asbalance sheet ratio.

COMBINE RATIO : If one amount is fromrevenue and another from balance sheetthen it will termed as combine ratio.


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particulars Rs.

OPERATING PROFIT(GP-Operating exp)

Add non operating incomeProfit on sale of assets

LESS Non operating expenses

Loss on sale of assets

Net profit before tax

Less Taxation

Net profit after tax

Less: Appropriation

Transfer to General reserve

Interim dividend

Xxx

Xxx

----

XXX

xxx

----Xxx

xxx

----

Xxx

Xxx

Xxx

Retained earning

-----

Xxx


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1.GROSS PROFIT RATIO

GROSS PROFIT

NET SALES_________________________ X 100 =____%

This ratio indicates trading profitability higherratio means higher profit and vise-versa


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2.NET PROFIT RATIO

X 100 = _____ %

This ratio indicates overall businessprofitability higher the ratio higher is the

profit and vise-versa.

___________________

NET SALES

NET PROFIT


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3.EXPENSE RATIO

This ratio indicate expenses in relation to saleshigher ratio means higher expenses and lower

profit and vise-versa

EXPENSES

NET SALES

_____________________X 100 = ____%


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4.OPERATING RATIO

100 =_____%

This ratio indicates total cost of business operation inrelation to net sales, higher the ratio higher is the cost

and lower will be profit and vise-versa

________________________COGS +OP EXP

NET SALES


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5.STOCK TURN OVER RATIO

AVERAGE STOCK =

This ratio indicates buying and selling efficiencymore number of time means better efficiency .

COST OF GOOD S SOLD

AVERAGE STOCK

_________________________________________OPENING STOCK + CLOSING STOCK

2

___________________________________ =_______TIME


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VERTICAL BALANCE SHEET

Particulars Amt

Sources offund

Shareholders fund

Equity shares

Preference shares

ADD: Reserve and Surplus

General reserve

P&l (dr)

LESS: Fictitious assets

P&l (cr)

Properitors fund/net worth

ADD: Long term liability10%debentures

Bank loan

Total fund/Capital employed

Xxx

Xxx

Xxx

Xxx

Xxx

----------

Xxx

Xxx

Xxx

----------

xxx


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II .BALANCE SHEET RATIOS

1. CURRENT RATIO

= __:1____________________________CURRENT ASSETS

CURENT LIABILITY

This ratio indicates short term solvency the

standard 2:1 lower ratio indicate inadequate

working capital and difficulty in payment to

current liability .


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2.QUICK RATIO/LIQUID RATIO/ ACID TEST

RATIO

QUICK ASSET = CURRENT ASSETS - CLOSINGSTOCK - PREPAID EXPENSES.

CURRENT LIABILITY = CURRENT LIABILITY - BANKOVERDRAFT.

This ratio indicates immediate solvency, the standard is 1:1lower ratio indicate inadequate liability and difficulty inpayment to immediate liability

______________________________QUICK ASSET

QUICK LIABILITIES= _____:1


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3.STOCK - WORKING CAPITAL RATIO

X___________________________CLOSING STOCK

WORKING CAPITAL1OO _____%

WORKING CAPITAL = CURENT ASSETS CURRENT LIABILITY

This ratio prescribed closing stock as percentage to

working capital, higher ratio means higher stock lower

liquidity and vise-versa


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4.PROPRITORY RATIO

X 100 ____%_____________________________PROPRITORS FUND

TOTAL ASSETS

TOTAL ASSET = FIXED ASSED + INVESTMENT+

CURRENT ASSET.

This ratio indicates long term stability higher ratio

means higher contribution by owners and better

long term satiability and vise- versa.


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5.DEBT- EQUITY RATIO

DEBT____________

EQUITY= _____:1

DEBT = Long term liabilities

EQUITY = PROPRITORS FUND

This ratio indicate long term solvency, the standard

is 2:1 lower ratio indicates under utilization of fund

chance of expansion and lower returns to the owner

higher ratio indicates chances of long term

insolvency


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6.CAPITAL GEARING RATIO

Debenture+ Prefer share +term loan_____________________________________________________

Proprietors fund Preference share=_____TIME

This ratio indicates fluctuation in equity dividend,

more number of times means higher gearing higherrisk higher profit and higher loss and vise-versa


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III. COMBINE RATIOS

1.EARNING PER SHARE RATIO

NET PROFIT AFTER INTEREST TAX &

DIVIDEND_____________________________________________

NO . OF EQUITY SHARES (ISSUED)

= RS. ___PER SHARE

This ratio indicates profit available for share holders.


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2.RETURN ON EQUITY CAPITAL RATIO


DIVIDEND___________________________________________

EQUITY SHARE CAPITAL

X 100 =______%


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3.RETURN ON CAPITAL EMPLOYED

RATIO

CAPITAL EMPLOYED

___________________________________________

X 100 = ____%

This ratio indicates profit available for equity share

holders.


DIVIDEND


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4.RETURN ON PROPRITERS FUND/ SHARE

HOLDERS FUND/NET WORTH RATIO

NET PROFIT AFTER TAX____________________________________

PROPRITERS FUNDX 100 = ____ %

PROPRITERS FUND = EQUITY SHARES +

PREFERANCE SHARES + RESERVES AND

SURPLUSE

This ratio indicates profit available for

proprietors fund.


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5.DIVIDENT PAY OUT RATIO

DIVIDEND PER SHARE________________________________

EARNING PER SHAREX 100 = _______%

Higher ratio means higher dividend pay out and lowertransfer to reserves.


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6. PRICE EARNING RATIO

MARKET PRICE PER SHARE_______________________________________

EARNING PER SHARE= ______ TIME

This ratio indicates market price in relation to

earning per share more number of time means

higher market price and share are to be sold andvise versa.


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7.DEBTORS TURNOVER RATIO

CREDIT SALES_______________________________________________________AVERAGE DEBTORS + AVERAGE BILLS

RECEIVABLE

=______TIME

AVERAGE COLLECTION PERIOD

AVRG DEBTORS + AVRG BILLS

RECEIVABLE______________________________________________

CREDIT SALES

365

DAYS/12

MONTHS/52 WEEKSX

= __________D/M/W.


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8.CREDIT TURNOVER RATIO

CREDIT PURCHASE

AVRG CREDITORS +AVRG BILLS PAYABBLE___________________________________________________________ = ___TIMES

AVERAGE PAYMENT PERIOD

AVRG CREDITORS +AVRG BILLS PAYABLE

CREDIT PURCHASE_______________________________________________________

365D,12M

,52WX

= ________D/M/W


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Statement showing sources of fund and Application

of fund

Sources of fund Amount(Rs) Application of fund Amount(Rs)

Decrease in working capital XXX Increase in working capital XXX

Issue of share XXX Redemption of share XXX

Sale of investment XXX Purchase of land and building XXX

Tax refund XXX Tax paid XXX

Sale of land and building XXX Dividend paid XXX

Net operating profit XXX Net operating loss XXX

XXXX XXXX


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Adjusted Profit and loss account

PARTICULAR AMOUNT(Rs) PARTICULAR AMOUNT(Rs)

To provision for tax XXX By balance b/d XXX

To depreciation on machinery XXX By profit on sale of investment XXX

To reserve A/C XXX By profit on sale of machinery XXX

To goodwill written off XXX By net operating profit XXX

To net operating Loss XXX

XXX XXX


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THANK YOU

ratio and vertical acs

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