Ratio List – Profitability, Working Capital/Liquidity, Financial Structure/Investors Criteria, Corporate ratios
With reference to Pyramid of Ratios
| Financial Level | Ratio | Abbreviation | Where to look/how to calculate | Used to | Issue |
| Profitability | Return On Investment | ROI | (Net income / Investment) | ||
| Working Capital/Liquidity | Debtors Days | (Trade Debtors + Customer advances / Average daily sales) | Measure of the “time” being funded or sourced i.e. days taken to receive payment form customers, before paying creditors etc. | ||
| Working Capital/Liquidity | Stock Days | (Stocks/(Average daily cost of sales (PL: sales cost/365)) | Measure of the “time” being funded or sourced i.e. days taken to receive payment form customers, before paying creditors etc. | ||
| Working Capital/Liquidity | Creditor Days | (Trade Creditors/Average daily cost of sales) | Measure of the “time” being funded or sourced i.e. days taken to receive payment form customers, before paying creditors etc. | ||
| Working Capital/Liquidity | Liquid Ratio | (Liquid assets/(Creditors (amount falling due within one year))) | |||
| Working Capital/Liquidity | Quick ratio | ||||
| Working Capital/Liquidity | Current Ratio | (Current Assets/(Creditors (amount falling due within one year)) | Measure of the overall management of working capital. A measure of the organisations ability to meet its financial obligations falling due within one year | ||
| Profitability | Sales Generation | (sales/(total assets – current liabilities)) | Measure of how well the asset base is being used for sales generation i.e. the amount of sales per AED of asset | Increase if ROS falls | |
| Profitability | Sales Generation | (sales/total assets) | Measure of how well the asset base is being used for sales generation i.e. the amount of sales per AED of asset | Increase if ROS falls | |
| Profitability | Return on Sales | ROS | (PBIT/sales x 100) | Measure of how well the asset base is being used for sales generation i.e. the amount of sales per AED of asset | |
| Profitability | Return on Capital Employed (or – rate of return) | RONA | (PBIT/(total assets – current liabilities) x 100) | Measure of the operating efficiency of the organisation in terms of EBIT generated per AED of asset | |
| Profitability | Return on Capital Employed (or – rate of return) | ROTA | (PBIT/total assets x 100) | Measure of the operating efficiency of the organisation in terms of EBIT generated per AED of asset | |
| Investors Criteria | Price/Earnings | P/E ratio | (Share price/Earnings per share) | Measures the number of years it would take to recoup an investment form its share of the attributable equity profit – give a market view of the quality of the underlying earnings. Indicates how many times earnings investors are willing to pay for shares. | High – indicates that market expects earnings to rise. |
| Financial Structure | Earnings Per Share | EPS | (P&L account) | ||
| Financial Structure | Return on Equity | ROE | (Profit available for distribution to shareholders/Shareholders funds x 100) | ||
| Financial Structure | Interest Cover | Interest Cover | (PBIT/Interest payable) | Measure of an organisations ability to service its borrowings | |
| Financial Structure | Gearing (Leverage in US) | Gearing | (Debt/Shareholders fund x 100) | Measures the relationship between funds provided by shareholders (owners) and funds provided form other sources which bear interest payments. Purpose is to identify financial risk in a certain capital structure. | The higher borrowings the higher the risk. >50% risky <20% conservative. Affects cost of capital but not cash. Tax relief on interest not on dividend. Low RONA + high Gearing = good ROE. |
| Financial Structure | Return on Equity | ROE | (Profit available for distribution to shareholders/Shareholders funds x 100) | Measures the return delivered to shareholders i.e. shareholders profitability. Important to balance shareholders fund and outside borrowing (RONA & Gearing balance) | |
| Investors Criteria | Dividend Per Share | (note to accounts) | Measure of earnings attributable to each share | ||
| Investors Criteria | Dividend Cover | (Profit available for distribution to shareholders/Dividends) | Measure of the number of times dividend is covered by earnings attributable to shareholders | ||
| Investors Criteria | Dividend Yield | Gross Dividend Tield | (Dividends per share/share price) | Measure of the dividend return as a pct of the market price of share | |
| Investors Criteria | Payout ratio | Measure of how much of the earnings attributable to shareholders is paid out as dividend | |||
| Corporate | Market/book | (market value/book value of assets) | Indicates how much the market values the company compared to the assets. | High – added value due to historic performance (successful strategies) and future expectations – puts pressure on future performance. | |
| Investors Criteria | EVA | ||||
| Profitability | Profit margin | EBITDA | Measure of the market driven efficiency in terms of the average profit margin achieved by the organisation across all products/services |
