Ratio analysis Ratio

Ratioanalysis

Ratio

Formula

Calculation

Company

Ratio

Industry Norm

Interpretation

Earnings per share of Common Stock

net income-dividends on preferred stock/ average outstanding common shares

790/409

1.931

1.912

Purchasing of the share is a good investment as the earnings are higher as compared with the market

Dividend Yield

annual dividends per share/ price per share

7/0.74

9.459

8.987

The dividend is lower as compared to the market value, this may influence the profitability

Price Earnings Ratio

market value per share/ earnings per share

0.995/ 1.52

0.6546

0.6546

The price earnings ratio determines the profitability of the shares and purchasing of the share is advised as its likely to increase in profit

Book Value per Share

of Common Stock

total shareholder equity-preferred equity/ total outstanding shares

221/ 49

4.5102

4.5046

The book value of share determines the value of shares before sale this

Operating Expense Ratio

operating expenses/ gross operating income

20,775/1,601

12.9762

10.783

The operating expense ratio is higher than the market value which shows profitability of the company

Return on Assets

net income/ average total assets

623/33,939

0.0183

0.0238

The return on assets is higher than the market value meaning that the company is more profitable

Return on Common Shareholder`s Equity

net income-preferred dividend/ average common stockholder’s equity

7/371

0.0188

0.0188

The returns on the common shareholder is the same as the market value meaning that investing in its shares is good

Equity Ratio

total equity/ total assets

12,787/33,939

0.3767

0.3798

Equity ratio determines the ability of the company to pay its long term and short term liabilities the value is higher than the market value hence it is good to purchase its shares

Number of Times Interest Earned

income before interest and taxes/ interest expense

623/644

0.9673

0.9674

The Number of times interest earned is higher than the market value hence one should buy more shares

Debt Ratio

total liabilities/ total assets

20,775/33,939

0.6121

0.5

The debt ratio determines the ability of the company to repay its debts, the value is higher as compared to the market value

Book Value per Share

of Preferred Stock

Stockholders` Equity – Preferred Stock/Average shares outstanding

This ratio could not be calculated since the stockholders equity is not available in the books of accounts

Working Capital

Current Assets – Current Liabilities

9,855- 7,222

2633

2583

The working capital shows the available capital for the company, the value is higher than the market value hence the company is profitable

Inventory Turnover

Sales-direct materials/sales

The ratio could not be calculated because the value of the direct materials are not available in the books

Accounts Receivable Turnover

Sales / Inventory

45,394/ 642 70.7071

Current Ratio

Current Assets/Current liabilities

9,855/7,222

1.3645

1.278

The current ratio determines the profitability of the company, the value is higher as compared to the market value hence the company is more profitable

Acid Test (Quick) Ratio

Current assets-inventories/current liabilities

9,855-642/7,222

1.2756

1.290

The acid or quick ratio determines the liquidity of the company, the value is lower than the market value meaning that purchasing its shares is valuable

Gross Profit Ratio

Sales – Direct materials/Sales

The ratio could not be calculated as the value of direct materials is not available in the books

Profit Margin

Net profit/Revenue

781/ 45,394

0.0172

0.0233

The profit margin ratio détermines the profitability of the company, the value is higher than the market value hence purchase of its share is of value