Ratios Help

Long-term debt: The sources of long-term debt are

  • Debentures
  • Bonds
  • Mortgages
  • Secured long from financial institutions and commercial banks.

They have to be repaid/redeemed either in lumpsum at the maturity of the long/debenture on in installments over the life of the loan.

Total debt: Long term debt plus short-term debts. This includes current liabilities.

Shareholders Equity: The shareholder's Equity includes.

  • Equity and preference share capital.
  • Past accumulated profits but excludes fictious assets like past accumulated losses discount on issue of shares etc.

Permanent Capital: This includes shareholders equity and long term debt.

Total Assets: The total asset consists of permanent capital plus current liabilities.

EBIT: Earring before Interest and Taxes or operating profit before interest and Taxes.

Interest:This is the amount to be paid or paid out on interest on long-term loan.

EAT: Earrings after Taxes.

Preference Dividend: The amount paid out as dividend on preference shares.

Gross Profit: This amount is calculated by subtracting cost of goods sold from sales.

Net Sales: All credit sales plus cash sales.

Cost of goods sold: Included in this cost are material cost, labour cost are other manufacturing expenses such as fuel, power, repairs, maintenance consumable stores, insurance of goods etc.

Administrative expenses: This includes all the expenses related to administration such as salary, managerial remuneration etc.

Selling Expenses: All expenses related to selling of the product.

Operating Expenses: The day to day expenses in cured in running a business such as sales and administration (Selling + Administrative expenses).

Financial Expenses: All expenses, which are of monetary nature, can be measured in terms of money.

Interest paid to creditors: This is the amount paid to creditors as interest for loan etc.

Tax advantage on Interest:

Average Total Assets: This can be calculated as follows (Opening Total Assets + Closing Total Assets)/2

Average Total Capital Employed: The term capital employed refers to long-term funds. It can be computed in two ways. First it is equal to non-current liabilities (long-term liabilities) plus owners equity. Alternatively it is equivalent to net working capital plus fixed assets.
Avg. Total capital Employed = (Total Opening Capital Employed+Total Closing Capital Employed)/2

Average Intangible Assets: Intangible assets do not generate goods and services directly. In the way reflect all the nights of the firm. This category of assets comprises patents, copyrights, trademarks, and goodwill.

Average Intangible Assets = (Opening Intangible Assets + Closing Intangible Assets)/2

Net Profit Available to Equityholders: It is the profit available to ordinary shareholders after taxes and preference dividend.

Preference Dividend Paid: Amount paid as dividend to the preference shareholders.

No of ordinary shares: The total number of ordinary shares outstanding.

Market Value Pershare: The market value per ordinary share.

Current Assets: The current assets of a firm represent those assets which can in the ordinary course of business, be converted into cash within a short period of time, normally net exceeding one year, and include cash and bank balances, marketable securities inventory of raw materials, work in progress, finished goods, debtors net of provision for bad and doubtful debts, bills receivable and prepaid-expenses.

Current Liabilities: These are short-term maturing obligations to be net within a year consist of trade creditors, bills payable, bank credit, provision for taxation, dividends payable and outs tending expenses.

Average Inventory: (Opening Inventory + closing Inventory)/2

Net Credit Sales: All the sales made in credit minus returns if any.

Average Debtors: (Opening Debtors + Closing Debtors)/2

Net Credit Purchases: All the purchases made in credit minus returns it any.

Average Creditors: (Opening Creditors + Closing Creditors)/2

Average Fixed Assets: They are fixed in the sense that they are acquired to be retained in business on a long-term basis to produce goods and services and are not for resale, like land and buildings, plant, machinery etc.
Average Fixed Assets = (Opening Fixed Assets + Closing Fixed Assets)/2

Average Current Assets: (Opening Current Assets + Closing Current Assets)/2

Quick Assets: The term quick assets refer to current assets which can be converted in to cash immediately or at a short notice with out diminution of value. Current assets included in this category are

  • Cash and bank balances
  • Short-term marketable securities
  • Debtors receivable

Thus the current assets which are excluded are prepaid expenses and inventory.

Projected Daily Cash Requirement: Projected cash operating expenditure/365 projected cash operating expenditure is based on past expenditures and future plans. It is equivalent to the cost of goods sold excluding depreciation, plus selling and administrative expenditure and other ordinary cash expenses.