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BUXLY PAINTS LIMITED PRESENTERS:
SYED MOIZ UDDIN (LEADER)
SYED FAIZAN HUSSAIN RATIO
Ratio analysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one year or to compare two or more years. Financial statement ratio analysis focuses on three key aspects of a business: liquidity, profitability, and solvency. PROFITABILITY RATIO How effective the firm is at generating profits given sales and or its capital assets. 1. GROSS PROFIT/NET SALES 2. OPERATING PROFIT BEFORE INTEREST AND TAX/SALES 3. PROFIT AFTER INTEREST AND TAX/SALES LIQUIDITY RATIO The ability of the firm to pay its way. 1. CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES 3. STOCK TURNOVER = COST OF GOOD SOLD / AVG. STOCK a. AVERAGE STOCK = (OPENING STOCK + CLOSING STOCK) /2 2. QUICK RATIO = C. ASSETS - INVENTORY / C. LIABILITIES 4. A/C RECEIVABLE TURNOVER = NET CREDIT SALES / AVG. A/C RECEIVABLE a. AVERAGE A/C RECEIVABLE= (OPENING RECEIVABLE + CLOSING RECEIVABLE) /2 b. STOCK DAYS = ( AVG STOCK/COST OF GOOD SOLD)*365 b. A/C RECEIVABLE DAYS = ( AVG RECEIVABLE / NET CREDIT SALES) *365 5. A/C PAYABLE TURNOVER = NET CREDIT PURCHASES / AVG. A/C PAYABLE a. AVERAGE A/C PAYABLE= (OPENING PAYABLE+ CLOSING PAYABLE) /2 b. A/C PAYABLE DAYS = ( AVG. PAYABLE / NET CREDIT PURCHASES) *365 6. CASH OPERATING CYCLE = STOCK DAYS - RECEIVABLE DAYS + PAYABLE DAYS INVESTOR RATIO Information to enable decisions to be made on the extent of the risk and the earning potential of a business investment. 1. EARNINGS PER SHARE = PROFIT AFTER TAX / NUMBER OF SHARES 2. PRICE EARNINGS RATIO = MARKET PRICE / EARNINGS PER SHARE 4. RETURN ON CAPITAL EMPLOYED = (NPBI / CAPITAL EMPLOYED) * 100 GEARING RATIO Information on the relationship between the exposure of the business to loans as opposed to share capital 1. GEARING RATIO = LONG TERM LOANS / CAPITAL EMPLOYED X 100 2. CAPITAL GEARING RATIO = EQUITY SHARE CAPITAL / FIXED INTEREST BEARING FUNDS ACCOUNTING FOR MANAGERS
BY SIR ASAD ULLAH AZIZI