Accounting ratios for analytical procedures

Certain accounting ratioss may be used as analytical procedures . Here are the key ratios used.




1. Performance ratios Return on capital employed

* Profit before interest and tax/equity + net debt

2. Return on shareholders' funds

*Net profit for the period/Share capital +reserves

3. Gross profit margin

* Grossoss profit * 100 /Revenue

4. Cost of sales percentage

* Cost off sales * 100 /Revenue

5. Operating cost percentage

*Operating costs*100/Revenue

6. Net margin = operating margin

*Profit before interest and tax*100/Revenue

7. Short-term liquidity ratios Current ratios

*Current assets : current liabilities

8. Quick ratios

*Receivables + Current investments +Cash: current liabilities

9. Long term solvency ratios Gearing ratios

* Net Net debt/equity * 100

10. Interest cover

*Profit before interest payable / Interest payable

11. Efficiency ratios Net assets turnover

*Revenue / Capital employed

12. Inventory turnover

*Cost of sales/Inventories

13. Inventory days

* Average inventory / cost of sales *365

14. Trade Receivables collection period

*Trade Receivables * 365 Revenue

15. Trade payables payment period

* Trade payables * 365 Credit purchase .


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