Chapter: Financial Statement and Ratio Analysis
1. Current ratio = Current assets / Current Liabilities (Note-1 : Search from Balance
sheet, Note-2: It will result on : )
Liquidity Ratios:
2. Quick Ratio = (Current Assets – Inventory) / Current Liabilities (Note-1 : Search from
Balance sheet, Note-2: It will result on : )
Activity ratios:
3. Inventory turnover = Cost of goods sold / Inventory (Note-1 : Search Cost of Good
Sold from Income Summary and search Inventory from Balance sheet, Note-2: It will
result on Times)
4. Average collection period = Accounts receivable /average sales per day
= Accounts receivable / (annual sales /365) (Note-1: Search Account
Receivable from Balance Sheet and search Annual Sales from Income
Statement/summary, Note-2: It will result on Days)
5. Average Payment period = Accounts payable / average purchase per day
= Accounts payable/ (annual purchase/365) (Note-1: Search Account
Payable from Balance Sheet and search Annual Purchase from Income
Statement/summary, Note-2: It will result on Days)
6. Total assets turnover = Sales / total assets (Note-1 : Search Sales from Income
Summary and search Total Assets from Balance sheet, Note-2: It will result on
Times)
Debt/Solvency Ratio:
7. Debt ratio = Total liabilities / Total assets (Note-1: Both are Search from Balance
sheet, Note-2: It will result on %)
The times interest earned ratio:
8. Times Interest earned ratio = Earnings Before Interest and Taxes (EBIT) / Interest
(Note-1 : Both are Search from Income Statement, Note-2: It will result on Times)
Profitability Ratio:
9. Gross profit margin = (Sales – cost of goods sold)/ Sales
=Gross profit / Sales (Note-1: Both are Search from Income
Statement, Note-2: It will result on %)
10.Operating profit margin = Operating Profits / Sales (Note-1: Both are Search from
Income Statement, Note-2: It will result on %)
11.Net profit margin = Earnings available for common stockholders (Net Profit) / Sales
(Note-1: Both are Search from Income Statement, Note-2: It will result on %)
12.Earnings per share (EPS) = Earnings available for common stockholders/ number of
share of common stock outstanding (Note-1 : Search Earnings available for common
stockholders from Income Summary and search number of share of common stock
outstanding from Balance sheet, Note-2: It will result on Tk)
13.Return on total assets (ROA) = Earnings available for common stockholders / Total
assets. (Note-1: Search Earnings available for common stockholders from Income
Summary and search Total Assets from Balance sheet, Note-2: It will result on %)
14.Return on common equity (ROE) = Earnings available for common stockholders /
common stock equity (Note-1: Search Earnings available for common stockholders
from Income Summary and search Common Stock Equity from Balance sheet, Note-
2: It will result on %)
15.Price/earnings(P/E) ratio = Market price per share of common stock/Earnings per
share (EPS) (Note-1 : Search Market price per share of common stock from Balance
Sheet and search Earnings per share (EPS) from calculation, Note-2: It will result on
Times)
16.Book value per share of common stock = common stock equity / number of share of
common stock outstanding (Note-1 : Both are Search from Balance Sheet, Note-2: It
will result on Tk)
17. Market / Book(M/B) ratio = market price per share of common stock/ Book value
per share of common stock (Note : Search Market price per share of common stock
from Balance Sheet and search Book value per share of common stock from
calculation)
