Accountancy/Quick Reference/Accounting Ratios

Profit-Based Ratios

 x Gross Profit Operating Profit (PBIT) Net Profit Profit After Tax ${\displaystyle {\frac {100\%}{Sales}}}$ Gross Profit Margin % Operating Profit Margin % Net Profit Margin % ${\displaystyle {\frac {100\%}{Equity+Debt}}}$ ROCE % ${\displaystyle {\frac {100\%}{Equity}}}$ Return on Equity % ${\displaystyle {\frac {1}{Debt}}}$ Interest Cover ${\displaystyle {\frac {1}{No.ofOrdinaryShares}}}$ Earnings per Share

The table shows how to calculate the ratios by multiplying the row and column headings together. e.g.

Gross Profit Margin % = ${\displaystyle {\frac {GrossProfit\times 100\%}{Sales}}}$

Earnings per Share = ${\displaystyle {\frac {ProfitafterTax}{No.ofOrdinaryShares}}}$

Also

Sales = Turnover
Equity = Ordinary Share Capital + Reserves
Debt = Long Term Liabilities = Non-Current Liabilities
Capital Employed = Equity + Debt
Asset Turnover = Sales / (Fixed Assets + Net Current Assets)
Fixed Assets + Net Current Assets = Equity + Debt (Accounting Equation)
ROCE = Operating Profit Margin x Asset Turnover