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Financial Statement Analysis

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Financial Statement Analysis-FIN621
Liquidity of Receivables: It shows have quickly Accounts Receivables are
collected i.e. converted into cash. It is determined by Receivable Turnover Ratio
(RTO). It is number of times "Receivables" are converted into cash during the year.
net sale for the year
= 100 = 10
Average Receivables during the year.  10
Ideally RTO = net credit sales______________
Monthly average of Receivables
The higher the RTO, the more liquid the company's Receivables.
Days required to collect Receivables i.e.
Converting "Receivable" into cash = 365 or 300 = 36 or 30
Normal credit terms: 30 to 60 days.
Length of operating cycle: A+ B (158, 130) days.
Gross Profit
x 100
Gross profit ratio
Net sales
Net Profit
x 100
Net Profit ratio
Net sales
Operating Profit x 100
Operating Profit ratio
Net sales
Individual Expenses
x 100
Expenses ratios
Net sales
Operating cost
x 100
Operating (Cost) Ratio
Net sales
Net Profit after inteerest and tax
x 100
Net Profit to net worth ratio
Net sales
Net Profit before interest, tax
x 100
Return on capital employed (ROI)
Capital employed
Net profit avaiable for equity shareholders
Earning per share
Number of equity shares
Dividends per share
______Dividend amunt______
Financial Statement Analysis-FIN621
Number of equity shares
___Cost or sales ___
Capital employed turnover ratio
Capital employed
Cost of sales or sales
Fixed assets turnover ratio
Fixed assets
Cost of sales or Net sales
Working capital turnover ratio
Net working capital
_____Cost of goods and sold______
Inventory turnover ration
Average accounts receivables
______Annual net credit sales______
Debtors (receivables) turnover ratio
Average accounts receivables
_______Accounts receivables______
Debtors (receivables) collection period
Average accounts receivables
____Net credit pruchases ___
Creditors turnover ratio
Average creditors
____Average accounts payables ___
Average credit period
Net credit purchase per day
_____Current aeests ____
Current ratio
Current liabilities
_______Quick assets______
Quick ratio/Acid test ratio
Current liabilities
Debt-equity ratio:
____Total long term debt____
Debt to net worth
Shareholder's funds
______External equity____
External-internal equity
Internal equity
____Total long term debts ___
Debt vs. funds
Total long term funds
Earnings before interest and taxes
Debt service ratio
Fixed interest charges
____Net fixed assets ___
Fixed assets ratio
Long-term funds
Solvency (Debt to total funds)
____Total liabiities ___
Total assets
____________ Equity _____________
Capital gearing ratio
fixed interest bearing securities
Financial Statement Analysis-FIN621
Proprietor's funds
Proprietary ratio
Total assets