FIN621

 Liquidity Ratois

1. Acid Test Ratio
Acid Test Ratio = (Current Assets – Inventory) / Current Liabilities
= (36,279,168 – 512,383) / 33455815
= 1.069
2. Sales to Working Capital
Sales to Working Capital = Total sales / (Current Assets – Current Liabilities)
= 76,983,408 / (36,279,168 – 33,455,815)
= 27.267
Solvency Ratios
1. Debt to Equity Ratio
Debt to Equity Ratio = (Long Term Debt + Current Portion of Debt) / Equity
= (15,582,621 + 2,578,888 + 376,509) / 10,315,060
= 1.80
2. Time Interest Earned Ratio
Time Interest Earned Ratio = Operating Profit / Interest Expenses
= 2,979,911 / 2,370,674
= 1.257

3. Fixed Charge Coverage
Fixed Charge Coverage = Profit before Interest and Taxes / Interest Expenses
= (Profit before tax + Finance Charges) / Interest Expenses
= (2,381,627 + 2,370,674) / 2,370,674
= 2.00

Profitability Ratios

1. Gross Profit Margin
Gross Profit Margin= Gross Profit / Total sales
= 7,404,163 / 76,642,399
= 9.66%

2. Operating Profit Margin
Operating Profit Margin = Operating Profit / Total sales
= 2,979,911 / 76,642,399
= 3.89%

3. Pre Tax Margin
Pre Tax Margin = Net Profit before Tax / Total sales
=2,381,627 / 76,642,399
= 3.11%

4. Net Profit Margin
Net Profit Margin = Net Income / Total sales
= 991,067 / 76,642,399
= 1.29%
5. Return on Equity (ROE)
Return on Equity (ROE) = Net Income / Owner’s Equity
= 991,067 / 10,315,060
= 9.61%

Activity Ratios:

1. Inventory Turnover

= Cost Of Goods Sold/ Average Inventory

Average Inventory = (368,903 + 512,383) / 2

= 440,643

= 69,238,236 / 440,643

= 157.13




2. Accounts Receivable Turnover



=Total Sales/ Average Receivables

Average Recievables=(16,061,073 + 20,045,028) / 2

= 18,053,050

=76,642,399/ 18,053,050

= 4.25




3. Accounts payable turnover

= Total Purchases / Average Payables

Total Purchases =82,468,502

Average Payables = 24,794,330 + 30,824,628) / 2

= 27,809,479




= 82,468,502/ 27,809,479

= 2.96


4. Average collection period

= 365 / Account Recievables Turnover

= 365 / 4.25

= 85.88 Days




5. Average payment period



= 365 / Average Payable Turnover

= 365 / 2.965

= 123.1 Days

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