Ratio List – Profitability, Working Capital/Liquidity, Financial Structure/Investors Criteria, Corporate ratios

With reference to Pyramid of Ratios

Financial LevelRatioAbbreviationWhere to look/how to calculateUsed toIssue
ProfitabilityReturn On Investment ROI(Net income / Investment)
Working Capital/LiquidityDebtors 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/LiquidityStock 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/LiquidityCreditor 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/LiquidityLiquid Ratio(Liquid assets/(Creditors (amount falling due within one year)))
Working Capital/LiquidityQuick ratio
Working Capital/LiquidityCurrent 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
ProfitabilitySales 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 assetIncrease if ROS falls
ProfitabilitySales 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 assetIncrease if ROS falls
ProfitabilityReturn on SalesROS(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
ProfitabilityReturn 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
ProfitabilityReturn 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 CriteriaPrice/EarningsP/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 StructureEarnings Per ShareEPS(P&L account)
Financial StructureReturn on EquityROE(Profit available for distribution to shareholders/Shareholders funds x 100)
Financial StructureInterest CoverInterest Cover(PBIT/Interest payable)Measure of an organisations ability to service its borrowings
Financial StructureGearing (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 StructureReturn on EquityROE (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 CriteriaDividend Per Share(note to accounts)Measure of earnings attributable to each share
Investors CriteriaDividend Cover(Profit available for distribution to shareholders/Dividends)Measure of the number of times dividend is covered by earnings attributable to shareholders
Investors CriteriaDividend YieldGross Dividend Tield(Dividends per share/share price)Measure of the dividend return as a pct of the market price of share 
Investors CriteriaPayout ratioMeasure of how much of the earnings attributable to shareholders is paid out as dividend
CorporateMarket/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 CriteriaEVA
ProfitabilityProfit marginEBITDAMeasure of the market driven efficiency in terms of the average profit margin achieved by the organisation across all products/services