Welcome to BBS Group
Exam Oriented Online Preparation Class – Free & Paid
SULAB SIR |9812608917
Sajilo Concept YouTube Channel ( Free Content )
Zoom Software for Online Class ( Paid Course )
Course Completion Basis
nufgLsf cfwf/e"t l;4fGtx?{ la=la=P;\ rf}yf] jif
Zoom Software for Online Class
Chapter -2
अनप
ु ात विश्लेषण
RATIO ANALYSIS FORMULA
✓ Formula Summary List
✓ Decision making of 5 types of Ratio
✓ DuPont Analysis
✓ Ratio Analysis Summary Notes
BBA | BBA-BI PUCourse Explained in g]kfnLdf
TYPES OF FINANCIAL RATIOS
1) Liquidity ratios 1-2
2) Asset Management Ratios 3-8 In this Video we will Cover
✓ Revision of Formula portion
3) Debt Management Ratios 9-14 ✓ Introduce all major section of Ratio
Analysis
4) Profitability Ratios 15-19 ✓ Interpretation Answer of each ratio-
measurement, HR & LR and units
5) Market Value Ratios 20-23
Du Pont Analysis & FCF 24-25
Sajilo Concept YouTube Channel ( Free Content )
TYPES OF FINANCIAL RATIOS
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭𝐬
1) Current Ratio(CR)=
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
𝐐𝐮𝐢𝐜𝐤 𝑨𝒔𝒔𝒆𝒕
2) Quick Ratio or Liquid Ratio or Acid Test Ratio(QR) =
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭𝐬−𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲
=
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
Times Unit
1) Liquidity ratios t/ntd cg'kft
Sajilo Concept YouTube Channel ( Free Content )
TYPES OF FINANCIAL RATIOS
;DklQ Joj:yfkg ;DaGwL cg'kftx? 2) Asset Mgmt. Ratio
𝐒𝐚𝐥𝐞𝐬
3) Inventory Turnover Ratio (ITOR) =
𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐢𝐞𝐬
𝐀𝐧𝐧𝐮𝐚𝐥 𝐂𝐫𝐞𝐝𝐢𝐭 𝐒𝐚𝐥𝐞𝐬
4) Receivable Turnover Ratio (RTOR) = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐀𝐜𝐜𝐨𝐮𝐧𝐭 𝐫𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬
𝐒𝐚𝐥𝐞𝐬
5) Fixed Asset Turnover Ratio (FATOR) = Times Unit
𝐍𝐞𝐭 𝐟𝐢𝐱𝐞𝐝 𝐀𝐬𝐬𝐞𝐭𝐬
𝐒𝐚𝐥𝐞𝐬
6) Total Asset Turnover Ratio (TATOR) =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
𝐑𝐞𝐜𝐞𝐢𝐯𝐚𝐥𝐛𝐞𝐬 𝐱 𝐃𝐚𝐲𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫
7) Days Sales Outstanding (DSO) =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐬𝐚𝐥𝐞𝐬 𝐩𝐞𝐫 𝐝𝐚𝐲𝐬
𝐀𝐜𝐜𝐨𝐮𝐧𝐭 𝐏𝐚𝐲𝐚𝐛𝐥𝐞 𝐱 𝐃𝐚𝐲𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫 Days Unit
8) Average Payment Period (APP) =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞 𝐩𝐞𝐫 𝐝𝐚𝐲𝐬
Sajilo Concept YouTube Channel ( Free Content )
TYPES OF FINANCIAL RATIOS C0f Joj:yfkg cg'kftx? Debt Mgmt. Ratio
𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭
9) Debt Ratio (DA ratio) =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭
10) Debt to Equity Ratio (DE ratio) =
𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫 𝐞𝐪𝐮𝐢𝐭𝐲
𝐋𝐨𝐧𝐠−𝐭𝐞𝐫𝐦 𝐃𝐞𝐛𝐭
11) Long term Debt to Asset Ratio =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
12) Equity Multiplier = 𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭 % Unit
𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲
13) Times Interest Earned (TIE) or 𝐄𝐁𝐈𝐓
=
Interest Coverage Ratio 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐄𝐱𝐩𝐞𝐧𝐬𝐞𝐬
𝐄𝐁𝐈𝐓+𝐃𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧
14) Cash Coverage Ratio =
𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐄𝐱𝐩𝐞𝐧𝐬𝐞𝐬
times Unit
Sajilo Concept YouTube Channel ( Free Content )
TYPES OF FINANCIAL RATIOS
𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭
15) Gross Profit Margin =
𝐒𝐚𝐥𝐞𝐬
𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
16) Net proft Margin (Net profit Ratio) =
𝐒𝐚𝐥𝐞𝐬
𝐄𝐁𝐈𝐓
17) Basic Earning Power Ratio =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
18) Return on Asset (ROA) =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭
𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
19) Return on Equity (ROE) =
𝐂𝐨𝐦𝐦𝐨𝐧 𝐄𝐪𝐮𝐢𝐭𝐲
% Unit
Profitability ratio
Sajilo Concept YouTube Channel ( Free Content )
TYPES OF FINANCIAL RATIOS
𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 𝐚𝐟𝐭𝐞𝐫 𝐓𝐚𝐱
20) Earning Per Share (EPS) =
𝐍𝐨 𝐨𝐟 𝐞𝐪𝐮𝐢𝐭𝐲 𝐒𝐡𝐚𝐫𝐞
𝐌𝐏𝐒
21) Price Earning Ratio (P/E Ratio) =
𝐄𝐏𝐒
𝐌𝐚𝐫𝐤𝐞𝐭 𝐏𝐫𝐢𝐜𝐞 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞
22) Market-to-Book Ratio =
𝐁𝐨𝐨𝐤 𝐕𝐚𝐥𝐮𝐞 𝐩𝐞𝐫 𝐒𝐡𝐚𝐫𝐞
𝐓𝐨𝐭𝐚𝐥 𝐁𝐨𝐨𝐤 𝐞𝐪𝐮𝐢𝐭𝐲
23) Book value per share (BVPS) =
𝐍𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐨𝐮𝐭𝐬𝐚𝐧𝐝𝐢𝐧𝐠 𝐬𝐡𝐚𝐫𝐞𝐬 𝐨𝐟 𝐜𝐨𝐦𝐦𝐨𝐧 𝐬𝐭𝐨𝐜𝐤
times Unit
Market Value Ratio
Sajilo Concept YouTube Channel ( Free Content )
TYPES OF FINANCIAL RATIOS
DuPont Analysis
24) ROA = Net profit margin x Total Assets Turnover
ROE = ROA (Net Profit margin x Total Assets Turnover) x Equity multiplier
Free Cash flow (FCF)
25 ) FCF
= EBIT (1-Tax) + Depreciation - Net new Investment in Operating Capital
Sajilo Concept YouTube Channel ( Free Content )
Ratio Analysis is the mathematical form of expression which
shows the relationship between two or more financial items.
It is designed to reveal a company’s strength and weakness as compared
with other companies in the same industry, and to show whether its
financial position has been improving or deteriorating over the time.
Sajilo Concept YouTube Channel ( Free Content )
✓ The set of ratios which measures the firm’s ability to fulfill short
term commitments out of its liquid assets.
✓ Purpose of this ratio is to test the solvency position for the
payment of short-term liabilities. 1) Liquidity ratios t/ntd cg'kft
Ps aif{sf] ;dofjlwleq s'g} ;8u7gn] cfkm";Fu ePsf t/n ;DklQaf6 cNksfnLg bfloTax? e'QmfgL ug{ ;Ifd 5 of
5}g eGg] oyfy{tfsf] hfrF ug{ k|of]u ul/g] cg'kftnfO{ t/ntf cg'kft elgG5 .
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭𝐬 Current Asset= Cash +Marketable securities +A/c receivables
[Link] ratio CR= +Inventories + Pre-paid expenses +other current Assets
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
(CR) Current Liabilities= Account Payables +Note Payables +
Accruals +Other Current liabilities
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭−𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲
2. Quick ratio QR=
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
(QR)
Quick Asset= Total Current Asset-Closing Stock- Prepaid expenses
OR Cash+ Marketable Securities + Account receivables
Ratio Measurement Standard High ratio Low ratio
1) Liquidity ratios t/ntd cg'kft Units |
Sajilo Concept YouTube Channel ( Free Content )
✓ A set of ratios which measure efficiency of a firm or company in generating revenue by
converting its production into cash or sales.
✓ Generally a fast conversion increase revenue and profit. Turnover ratio show how frequently
the asset are converted into cash & sales
;DklQ Joj:yfkg ;DaGwL cg'kftx? 2) Asset Mgmt. Ratio
कुनै सङ्गठनका सम्पविहरूको प्रभािकारी प्रयोग िा व्यिस्थापन भए नभएको तथ्य पिा लगाउन सम्पवि व्यिस्थापन
सम्बन्धी अनपु ातहरू (Asset management ratios) को विश्लेषण गररन्छ । तसथथ, यस प्रकारको अनप
ु ातलाई प्रभािकारी
अनुपात (Efficiency ratio) पनन भननन्छ ।
𝐂𝐨𝐬𝐭 𝐨𝐟 𝐆𝐨𝐨𝐝𝐬 𝐒𝐨𝐥𝐝 CoGs = 𝐒𝐚𝐥𝐞𝐬 − 𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭
ITOR =
1) Inventory Turnover 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐢𝐞𝐬 𝐎𝐩𝐞𝐧𝐢𝐧𝐠 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲+𝐂𝐥𝐨𝐬𝐢𝐧𝐠 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲
=
Ratio (ITOR) 𝟐
𝐃𝐚𝐲𝐬 𝐢𝐧 𝐚 𝐲𝐞𝐚𝐫
𝐒𝐚𝐥𝐞𝐬 Day's Sales in inventory =
ITOR = 𝐈𝐓𝐎𝐑
𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐢𝐞𝐬
2) Receivable TOR 𝐀𝐧𝐧𝐮𝐚𝐥 𝐂𝐫𝐞𝐝𝐢𝐭 𝐒𝐚𝐥𝐞𝐬
RTOR =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐀𝐜𝐜𝐨𝐮𝐧𝐭 𝐫𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬
Sajilo Concept YouTube Channel ( Free Content )
𝐑𝐞𝐜𝐞𝐢𝐯𝐚𝐥𝐛𝐞𝐬 𝐱 𝐃𝐚𝐲𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫
3) Days Sales Outstanding (DSO) DSO = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐬𝐚𝐥𝐞𝐬 𝐩𝐞𝐫 𝐝𝐚𝐲𝐬
𝐀𝐜𝐜𝐨𝐮𝐧𝐭 𝐏𝐚𝐲𝐚𝐛𝐥𝐞 𝐱 𝐃𝐚𝐲𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫
4) Average payment period (APP) APP = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞 𝐩𝐞𝐫 𝐝𝐚𝐲𝐬
5) Fixed Asset Turnover Ratio 𝐒𝐚𝐥𝐞𝐬 Net Fixed Asset
(FATOR) FATOR =
𝐍𝐞𝐭 𝐟𝐢𝐱𝐞𝐝 𝐀𝐬𝐬𝐞𝐭 = Gross fixed Asset - Depreciation
6) Total Asset Turnover Ratio 𝐒𝐚𝐥𝐞𝐬
TATOR = 𝐓𝐨𝐭𝐚𝐥 𝐟𝐢𝐱𝐞𝐝 𝐀𝐬𝐬𝐞𝐭
(TATOR)
Sajilo Concept YouTube Channel ( Free Content )
Ratio Measurement Units High ratio Low ratio
How rapidly or
1) Inventory slowly the Times Good. It indicate that the inventory Not Good. It indicates that the
Turnover Ratio inventory is is selling faster and there is less inventory is selling slowly and the
selling? possibility of holding outdated is possibility of holding idle and
stock outdated stock
2) Days Sales In how many days Days Not Good. It indicates that the Good. It indicated that the
Outstanding the amount of customer are paying slowly and customer are paying promptly and
credit sales is there is possibility of bad debt loss there is no possibility of bad debt
collecting ? loss.
How much sales is Good. It indicates that fixed assets No Good. It indicates that fixed
3)Fixed Asset generating by a Times are utilized properly and generating assets are not utilized efficiently
Turnover rupee invested in adequate sales. and generating sufficient sales.
Fixed assets
@_ ;DklQ Joj:yfkg ;DaGwL cg'kftx? Units |
Sajilo Concept YouTube Channel ( Free Content )
✓ A set of ratios which measure How the long-term funds are used in the business
concern.
✓ It measure the extent to which a firm used debt financing, or financing leverage.
C0f Joj:yfkg cg'kftx? 3) Debt Mgmt. Ratio
Shareholder equity = Common Stock + Additional paid in
capital + Retained Earning
𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭 𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭
1) Debt Ratio (DA) DA ratio = 2) Debt-EquityRatio (DE) DE ratio =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬 𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲
3) Long term debt 𝐃/𝐄 𝟏
𝐋𝐨𝐧𝐠 𝐭𝐞𝐫𝐦 𝐃𝐞𝐛𝐭 D/A = EM =
= 𝟏+𝐃/𝐄 𝟏−𝐃/𝐀
to Total Asset Ratio 𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
𝑫 𝐃/𝐀
EM= 1+ D/E =
𝟏−𝐃/𝐀
4) Equity Multiplier 𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭 𝑬
=
(EM) 𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲
Relationship between D/A,
D/E and EM
Sajilo Concept YouTube Channel ( Free Content )
5) Times Interest Earned (TIE) Ratio 6) Cash Coverage ratio
or Interest Coverage Ratio (TIE) 𝐄𝐁𝐈𝐓+𝐃𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧
=
𝐄𝐁𝐈𝐓 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐞𝐱𝐩𝐞𝐧𝐬𝐞𝐬
=
𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐞𝐱𝐩𝐞𝐧𝐬𝐞𝐬
Ratios Measurement High Ratio Low Ratio
High ratio is not good because NOT GOOD. because It is an
What percentages of the total failure to pay the debt brings the indication of inefficiency in
Debt ratio assets are financed by debt possibility of legal action by exploring profitable
(creditors) ? creditors. investments and managing
resources.
What is the proportion of total High ratio is not good because it NOT GOOD. because it is an
Debt to equity debt and shareholders’ equity? reduces the claim of shareholders indication inefficiency in taking
ratio and makes their equity more advantages of debt capital
risky
Sajilo Concept YouTube Channel ( Free Content )
Ratios Measurement High Ratio Low Ratio
Equity multiplier What is the ratio between NOT GOOD. Because it is an NOT GOOD. because it is an indication of
total assets and equity? indication of high debt and use of low debt and less advantages of
increases the financial risk debt capital.
Is the firm able to meet its GOOD. because if the ratio is NOT GOOD. because a firm cannot pay
TIE ratio annual interest from the high, a firm can easily pay interest if operating income declines by
operating income? interest even after the large small amount.
decline in operating income
Sajilo Concept YouTube Channel ( Free Content )
Profitability ratio
✓ A group of ratios that show the combined effects of liquidity, assets management,
and debt management on operating results.
✓ It measures the earnings of the company for certain period.
कुनै पनन सङ्गठनको नाफा जहहले पनन तरलता, सम्पविको व्यिस्थापन र ऋणको मात्राबाट प्रभावित भएको
हुन्छ । नाफायोग्यता सम्बन्धी अनुपात (Profitability ratio) अन्तगथत विशेषगरी बबक्री, नाफा र लगानीको
तलु ना गररन्छ । सक्षेपमा, कुनै पनन सङ्गठनको लगानीमा कनत प्रनतशत प्रनतफल आजथन भएको छ भन्ने
तथ्य पिा लगाउन नाफायोग्यतासम्बन्धी अनुपात (Profitability ratio) ननधाथरण गररन्छ
𝐍𝐞𝐭 𝐢𝐧𝐜𝐨𝐦𝐞 5. Return on common equity (ROE)
1. a) Net profit margin on sales Profit margin =
𝑺𝒂𝒍𝒆𝒔
𝐍𝐞𝐭 𝐢𝐧𝐜𝐨𝐦𝐞
𝐆𝐫𝐨𝐬𝐬 𝐢𝐧𝐜𝐨𝐦𝐞
(ROE) =
𝐂𝐨𝐦𝐦𝐨𝐧 𝒆𝒒𝒖𝒊𝒕𝒚
b) Gross profit margin on sales Gross margin =
𝑺𝒂𝒍𝒆𝒔
2. Operating Profit margin Operating profit margin =
𝐄𝐁𝐈𝐓 Sajilo Concept YouTube Channel
𝑺𝒂𝒍𝒆𝒔
𝐍𝐞𝐭 𝐢𝐧𝐜𝐨𝐦𝐞
3. Basic earning power Basic earning power ration =
𝑺𝒂𝒍𝒆𝒔
𝐍𝐞𝐭 𝐢𝐧𝐜𝐨𝐦𝐞
Return on total assets (ROA) =
𝐓𝐨𝐭𝐚𝐥 𝑨𝒔𝒔𝒆𝒕𝒔
4. Return on total assets
Ratios Measurement Hight Ratio Low Ratio
GOOD because it is an Low ratio is not good
What is the percentage of gross indication of effective because it is an indication
1) Gross profit margin
profit on sales? control on cost of goods of inefficiency in
sold controlling cost of goods .
GOOD because it is an NOT GOOD because it is an
2) Return on Asset What is the overall return indication of better utilization indication of inefficient use
(ROA) on assets? of assets and proper control of assets and improper
over expenses. control over expenses.
GOOD because it is an NOT GOOD because it is an
What is the rate of return
3) Return on Equity indication of better utilization indication of inefficient use
common stockholders’
(ROE) of assets, proper control on of assets and improper
investment?
expenses and appropriate use control over expenses.
of debt.
Market Value Ratio
✓ A set of ratios that relate the firm’s stock price to its earnings, cash flow, and book
value per share. And thus give management an indication of what investors think
of the company’s past performance and future prospects.
कुनै पनन सङ्गठनको अन्न्तम लक्ष्य भनेको साधारण शेयर (Common Stock) को बजार मल् ू यमा बद्
ृ धध गनुथ हो।
सङ्गठनको तरलता, सम्पविको प्रभािकारी व्यिस्थापन, ऋणको उधित प्रयोग र नाफा एिम ् नगद प्रिाह
आहदलेशय े रको मल्
ू यलाई प्रभावित पादथ छन ् । शेयरको मल्
ू य सम्बन्धी विभभन्न अनुपातहरूलाई ननम्नअनुसार
प्रस्तत
ु गररएको छ ।
Net Profit after Tax Net Profit after Tax−Preference Dividend
Earning Per Share (EPS) EPS = EPS =
No of equity shares No of equity shares
MPS
Price –Earning Ratio (P/E Ratio) P/E ratio = Earning yield
EPS
Total Book Equity
Book Value per share (BVPS) BVPS =
No of outstanding shares of Common Stock
MPS
Market-to-Book Ratio Market to Book Ratio =
BVPS
Dividend paid to equity shareholders
5. Dividend per share DPS =
Number of equity shares
DPS EPS−DPS REPS
6. Dividend payout ratio Dividend payout ratio = Retention ratio = =
EPS EPS EPS
Dividend per share
7. Dividend yield Dividend yield =
Market value per share
interpretation
/ɪntəːprɪˈteɪʃ(ə)n/
Sajilo Concept YouTube Channel ( Free Content )
Ratios Measurement Hight Ratio Low Ratio
GOOD because it is an Low ratio is not good
How much income has been indication better because it is an indication
1. Earnings per share
earned by a share profitability. of poor earning capacity .
(EPS)
GOOD it is an indication high NOT GOOD because it is an
How much investors are indication of less growth
growth prospects
[Link] earnings ratio willing to pay per rupee of prospects.
earning?
GOOD because it may result NOT GOOD because it may
What is the net worth per
3. Book value per share increase in market price of result decline in market
share?
share price of share
How much investors are GOOD because Investors will NOT GOOD Investors will
willing to pay per rupee of be willing to pay high price not be willing to pay high
4. Market/Book ratio
net worth. for the shares, if the ratio is price for the shares.
high
DuPont Analysis is an extended examination of Return on Equity (ROE) of a company which analyses Net Profit Margin,
Asset Turnover, and Financial Leverage. This analysis was developed by the DuPont Corporation in the year 1920.
DuPont Analysis Interpretation
It gives a broader view of the Return on Equity of the company. It highlights the company’s strengths and pinpoints the
area where there is a scope for improvement.
Say if the shareholders are dissatisfied with lower ROE, the company with the help of DuPont Analysis formula can
assess whether the lower ROE is due to low-profit margin, low asset turnover or poor leverage.
The DuPont system merges the income statement and balance sheet into two summary measure of profitability;
return on total assets (ROA) and return on equity (ROE).
ROA = Net profit margin x Total Assets Turnover
ROE = ROA (Net Profit margin x Total Assets Turnover) x Equity multiplier
Sajilo Concept YouTube Channel ( Free Content )
RETURN ON EQUITY (ROE)
RETURN ON ASSET (ROA) EQUITY MULTIPLIER (EM)
Net Profit Margin Asset Turnover Total Asset Equity
Sales Total Asset Fixed Assets Current Assets Retained Earning
Net Income Sales
Cash & Bank Paid-in Capital
Mkt Securities Common Stock
Sales Total Assets
Receivable
Inventory
Operating Expenses Depreciation Interest Taxes
Sajilo Concept YouTube Channel ( Free Content )
Welcome to BBS Group
Exam Oriented Online Preparation Class – Free & Paid
SULAB SIR |9812608917
Sajilo Concept YouTube Channel ( Free Content )
Zoom Software for Online Class ( Paid Course )
Course Completion Basis
nufgLsf cfwf/e"t l;4fGtx?{ la=la=P;\ rf}yf] jif
Zoom Software for Online Class
Copy protected with [Link]
