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Ratio Analysis Equations
Management Accounting (Mahatma Gandhi University)
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RATIO ANALYSIS- EQUATIONS
Simple format of P&L a/c (Income Statement)
Net revenue from operations (Net sales) XX
(-) Cost of revenue from operations (Cost of goods sold) XX
Gross profit XX
(-) Operating expenses (Indirect Expenses) XX
(+) Operating income XX
Operating profit (EBIT) XX
(-) Interest XX
EBT XX
(-) Tax XX
Net Profit (EAT) XX
(-) Preference dividend XX
Earnings available to equity shareholders XX
(÷) No. of equity shares XX
Earnings per share (EPS) XX
I. Liquidity Ratios/ Short term Solvency Ratios
Sl. Ratios Equation Ideal
No Ratio
1 Current Ratio 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔 2:1
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
2 Quick Ratio/Acid test Ratio/ Liquid 𝑸𝒖𝒊𝒄𝒌/𝑳𝒊𝒒𝒖𝒊𝒅 𝑨𝒔𝒔𝒆𝒕𝒔 1:1
Ratio 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
3 Absolute Liquid Ratio 𝑪𝒂𝒔𝒉 & 𝑪𝒂𝒔𝒉 𝑬𝒒𝒖𝒊𝒗𝒂𝒍𝒆𝒏𝒕𝒔 1:2
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
(Cash & cash equivalents includes marketable
securities)
Working Capital = Current Assets – Current Liabilities
Current Assets = Total Assets/ Liabilities – Non-Current Assets
Current Liabilities = Total Liabilities/ Assets – [Shareholders Fund (Share capital + Reserves & Surplus) + Non-Current Liabilities]
When only working capital and current ratio is given;
Proportion of Current Asset
Current Assets = Working Capital x Proportion of Working Capital
Proportion of Current Liabilities
Current Liabilities = Working Capital x Proportion of Working Capital
Stock in trade/ Inventories = Current Assets – Liquid Assets
II. Solvency Ratios/ Long term Solvency & Leverage Ratios (Capital Structure Ratios)
Sl. Ratios Equation Ideal
No Ratio
1. Debt-Equity Ratio (D/E 𝑫𝒆𝒃𝒕 𝑳𝒐𝒏𝒈 𝒕𝒆𝒓𝒎 𝒅𝒆𝒃𝒕𝒔 2:1
𝑶𝑹
Ratio) 𝑬𝒒𝒖𝒊𝒕𝒚 𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓′ 𝒔 𝒇𝒖𝒏𝒅 𝒐𝒓 𝑵𝒆𝒕 𝒘𝒐𝒓𝒕𝒉
Long term debts = Long term borrowings (debentures, bank loans, public deposits) + Long term provisions (employees
provident fund, pension fund, etc)
Shareholder’s fund = Share capital (Equity & Preference) + Reserves & Surplus
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2. Proprietary Ratio 𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓′ 𝒔𝒇𝒖𝒏𝒅 1:3
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
3. Solvency Ratio 𝑻𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝒕𝒐 𝒐𝒖𝒕𝒔𝒊𝒅𝒆𝒓𝒔 -
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Total liabilities to outsiders = Current liabilities + Non-Current liabilities
4. Fixed Asset Ratio 𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕 (𝒂𝒇𝒕𝒆𝒓 𝒅𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒕𝒊𝒐𝒏) 1:1
𝑻𝒐𝒕𝒂𝒍 𝒍𝒐𝒏𝒈 𝒕𝒆𝒓𝒎 𝒇𝒖𝒏𝒅𝒔
Total long-term funds = Shareholder’s fund + Non-Current liabilities
5. Interest Coverage Ratio/ 𝑬𝑩𝑰𝑻 6 or 7
Debt Service Ratio 𝑭𝒊𝒙𝒆𝒅 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑪𝒉𝒂𝒓𝒈𝒆𝒔 times
Fixed interest charges = Interest on debentures, bonds & other long-term borrowings
6 Fixed Assets to Net Worth 𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕𝒔 -
Ratio 𝑵𝒆𝒕 𝒘𝒐𝒓𝒕𝒉 𝒐𝒓 𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓′ 𝒔𝒇𝒖𝒏𝒅
7. Capital Gearing Ratio 𝑭𝒊𝒙𝒆𝒅 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑩𝒆𝒂𝒓𝒊𝒏𝒈 𝑭𝒖𝒏𝒅𝒔 -
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓′ 𝒔𝒇𝒖𝒏𝒅 𝒆𝒙𝒄𝒍𝒖𝒅𝒊𝒏𝒈 𝑷𝒓𝒆𝒇𝒆𝒓𝒏𝒄𝒆 𝒔𝒉𝒂𝒓𝒆 𝒄𝒂𝒑𝒊𝒕𝒂𝒍
Fixed interest-bearing funds = Preference share capital + debentures + long term loans
III. Profitability Ratios
a) General Profitability Ratios
Sl. Ratios Equation
No
1. Gross Profit Ratio 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕
𝒙 𝟏𝟎𝟎
𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔 𝒊. 𝒆. , 𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
Gross profit = Revenue from operations (Sales) – Cost of revenue for operations (Cost of goods sold)
Cost of revenue for operations = Opening inventory + Purchases + Direct expenses – Closing inventory
OR
Cost of revenue from operations = Revenue from operations- Gross profit
2. Net Profit Ratio/ Net Profit 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝒕𝒂𝒙 𝒃𝒖𝒕 𝒃𝒆𝒇𝒐𝒓𝒆 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝒙 𝟏𝟎𝟎
Margin Ratio 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
(Preference dividend)
Net profit = Gross profit – Indirect expenses & losses + Other incomes – Tax
Indirect expenses & losses = Office expenses + Selling expenses + Interest on long term borrowings + Accidental
losses
3. Operating Ratio 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑪𝒐𝒔𝒕
𝒙 𝟏𝟎𝟎
𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
Operating cost = Cost of revenue for operations + Operating expenses – Operating incomes
Operating expenses = Employee benefit expenses + Depreciation & amortisation expenses + Other expenses
4. Operating Profit Ratio 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
𝒙 𝟏𝟎𝟎
𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
Or
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100 – Operating Ratio
Operating profit = Revenue from operations – Operating cost
Or
Operating profit = Net profit + Non operating expenses – Non operating income
5. Expenses Ratio 𝑷𝒂𝒓𝒕𝒊𝒄𝒖𝒍𝒂𝒓 𝑬𝒙𝒑𝒆𝒏𝒔𝒆𝒔
𝒙 𝟏𝟎𝟎
𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
b) Overall Profitability Ratios
Sl. Ratios Equation
No
1. Return on Shareholder's Fund 𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒕𝒂𝒙 𝒃𝒖𝒕 𝒃𝒆𝒇𝒐𝒓𝒆 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝒙 𝟏𝟎𝟎
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓′ 𝒔 𝑭𝒖𝒏𝒅
(Preference dividend)
2. Return on Equity Share Capital 𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕, 𝒕𝒂𝒙 𝒂𝒏𝒅 𝒑𝒓𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝒙 𝟏𝟎𝟎
𝑬𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆 𝒄𝒂𝒑𝒊𝒕𝒂𝒍
3. Return on Capital Employed (Yield 𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒃𝒆𝒇𝒐𝒓𝒆 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕, 𝒕𝒂𝒙 𝒂𝒏𝒅 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝒙 𝟏𝟎𝟎
on Capital/ Return on Investment) 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒅
Capital employed = Shareholders fund + Non current liabilities
Or
Capital employed = Non current assets + Net working capital
Or
Capital employed = Total assets – Current liabilities
4. Earnings Per Share (EPS) 𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝒕𝒐 𝒕𝒉𝒆 𝒆𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔
(𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕, 𝒕𝒂𝒙 𝒂𝒏𝒅 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅)
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒆𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆𝒔 𝒊𝒔𝒔𝒖𝒆𝒅
5. Price-Earning (P.E) Ratio 𝑴𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆 𝒑𝒆𝒓 𝒆𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆
𝑬𝑷𝑺
6. Dividend Yield Ratio 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
𝒙 𝟏𝟎𝟎
𝑴𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
7. Dividend Pay Out Ratio (D/P 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒆𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆
Ratio) 𝑬𝑷𝑺
OR
𝑻𝒐𝒕𝒂𝒍 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒂𝒊𝒅 𝒕𝒐 𝒆𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔
𝒙 𝟏𝟎𝟎
𝑻𝒐𝒕𝒂𝒍 𝒏𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒃𝒆𝒍𝒐𝒏𝒈𝒊𝒏𝒈 𝒕𝒐 𝒆𝒒𝒖𝒊𝒕𝒚 𝒔𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔
8. Return on Total Assets 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝒃𝒆𝒇𝒐𝒓𝒆 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕, 𝒕𝒂𝒙 𝒂𝒏𝒅 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝒙 𝟏𝟎𝟎
𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔
9. Capital Turnover Ratio 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
𝒙 𝟏𝟎𝟎
𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝒆𝒎𝒑𝒍𝒐𝒚𝒆𝒅
10. Cover for Preference Dividend 𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝒕𝒂𝒙
𝒙 𝟏𝟎𝟎
𝑷𝒓𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
11. Cover for Equity Dividend 𝑬𝑷𝑺
𝒙 𝟏𝟎𝟎
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒆𝒒𝒖𝒊𝒕𝒚
3
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IV. Activity Ratios (Turnover Ratios)
Sl. Ratios Equation
No
1. Inventory Turnover Ratio (Stock turnover 𝑪𝒐𝒔𝒕 𝒐𝒇 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
ratio or Stock velocity) 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
Average Inventory = 𝟐
Average age of inventory (Inventory holding 𝑵𝒐.𝒐𝒇 𝒅𝒂𝒚𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
In days = 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
period/ Stock realisation period)
𝑵𝒐.𝒐𝒇 𝒎𝒐𝒏𝒕𝒉𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
In months = 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
2. Fixed Assets Turnover Ratio 𝑵𝒆𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕𝒔
3. Working Capital Turnover Ratio 𝑵𝒆𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
𝑵𝒆𝒕 𝒘𝒐𝒓𝒌𝒊𝒏𝒈 𝒄𝒂𝒑𝒊𝒕𝒂𝒍
4. Trade Receivables Turnover Ratio 𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔 (𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒔𝒂𝒍𝒆𝒔)
(Debtors turnover ratio/Debtor’s velocity) 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
Net credit sales = Total sales – Cash sales – Sales returns
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
Average trade receivables = 𝟐
(Study note on page no. 3.52)
Average collection period 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
In days = 𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔 × 𝟑𝟔𝟓
OR
𝑵𝒐.𝒐𝒇 𝒅𝒂𝒚𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
In days = 𝑻𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
In months = × 𝟏𝟐
𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏𝒔
OR
𝑵𝒐.𝒐𝒇 𝒎𝒐𝒏𝒕𝒉𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
In months = 𝑻𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
5. Trade Payables Turnover Ratio (Creditors 𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔
turnover ratio/Creditor’s velocity) 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒓𝒂𝒅𝒆 𝒑𝒂𝒚𝒂𝒃𝒍𝒆𝒔
Net credit purchases = Total purchases – Cash purchases – Purchase returns
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝒕𝒓𝒂𝒅𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
Average trade receivables = 𝟐
(Study note on page no. 3.54)
Average payment period 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒓𝒂𝒅𝒆 𝒑𝒂𝒚𝒂𝒃𝒍𝒆𝒔
In days = × 𝟑𝟔𝟓
𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔
OR
𝑵𝒐.𝒐𝒇 𝒅𝒂𝒚𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
In days = 𝑻𝒓𝒂𝒅𝒆 𝒑𝒂𝒚𝒃𝒍𝒆𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒓𝒂𝒅𝒆 𝒑𝒂𝒚𝒂𝒃𝒍𝒆𝒔
In months = × 𝟏𝟐
𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔
OR
𝑵𝒐.𝒐𝒇 𝒎𝒐𝒏𝒕𝒉𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
In months =
𝑻𝒓𝒂𝒅𝒆 𝒑𝒂𝒚𝒂𝒃𝒍𝒆𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
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lOMoARcPSD|53486253
Current Assets + Non-Current Assets = Shareholders Fund + Current Liabilities
=>Current Assets – Current Liabilities = Shareholders Fund – Non-Current Assets
=> Working Capital = Shareholders Fund – Non-Current Assets (Fixed Assets)
Total Assets = Current Assets + Non-Current Assets (Fixed Assets)
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lOMoARcPSD|53486253
Other Income
Interest Income
Rental Income
Gain on Sale of Assets
Dividend Income
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