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An Explanation of Credit Consultancy Report Ratios |
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The analysis is prepared using 22 salient ratios
LIQUIDITY RATIOS:
1. Current Ratio
The sum of Current Assets and Quoted Investments expressed as a Ratio of Total Current Liabilities
2. Acid Test
The sum of Current Assets less Stock and Work in Progress, divided by Total Current Liabilities
3. Stock Turnover
Total Sales divided by Stocks: The number of times Stocks are turned over during the year
4. Credit Period (Days)
Trade Debtors divided by Total Sales and multiplied by 365, giving the average number of days taken before accounts are paid
5. Working Capital/Sales
Working Capital (namely Current Assets minus current Liabilities) expressed as a percentage of Sales
6. Trade Creditors/Debtors
Trade Creditors expressed as a Ratio of Trade Debtors
PROFITABILITY RATIOS:
7. Return on Capital Employed
Pre-tax Profit expressed as a percentage of Capital Employed (Shareholders’ Funds + Long-term Loans + Other Long-term Liabilities)
8. Return on Assets
Pre-tax Profit as a percentage of Total Assets
9. Pre-tax Profit Margin
Pre-tax Profit expressed as a percentage of Turnover
10. Return on Shareholders’ Funds
Pre-tax Profit expressed as a percentage of Shareholders’ Funds
GEARING RATIOS:
11. Borrowing Ratio
Total Debt expressed as a percentage of Net Worth (Shareholders’ Funds less Intangibles)
12. Equity Gearing
Shareholders’ Funds expressed as a percentage of Total Liabilities (sum of Capital Employed and Current Liabilities)
13. Debt Gearing
Long-term Debt expressed as a percentage of Net Worth
14. Interest Cover
Pre-tax Profit expressed as a Ratio of Interest Payable
PRODUCTIVITY RATIOS:
15. Sales/Tangible Fixed Assets
Total Sales expressed as a Ratio of Tangible Fixed Assets
16. Average Remuneration/Employee
Total Employee Remuneration divided by the Number of Employees
17. Profit/Employee
Pre-tax Profit divided by the Number of Employees
18. Sales/Employee
Total Sales divided by the Number of Employees
19. Capital Employed/Employee
Capital Employed divided by the Number of Employees
20. Tangible Fixed Assets/Employee
Tangible Fixed Assets divided by the Number of Employees
21. Total Assets/Employee
Total Assets divided by number of Employees
22. Employee Remunerations/Sales
Wages Expressed as a percentage of Total Sales
OTHER MANAGEMENT RATIOS:
Export Ratio
Exports (where disclosed) expressed as a percentage of Sales
Income Gearing
Gross Interest Paid expressed as a percentage of Pre-Interest, Pre-tax Profit
Total Debt/Working Capital
Total Debt expressed as a ratio of Working Capital
Debtors/Total Assets
Trade Debtors expressed as a percentage of Total Assets
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