FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka


Submit PostSubmit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post



Latest topics

» SEMB SEMB
by RJ1010 Today at 12:21 am

» Leading brokers causing market downturn
by dhanushkacse Yesterday at 10:18 pm

» පෙබරවාරි මාසේ කොළඹ කොටස් වලට මොකක්ද වුනේ - බැසුවාද ? බැස්සාද ?
by Nishan Cooray Yesterday at 9:42 pm

» TRUE VALUE OF LANKA ALUMINUM INDUSTRY (LALU)
by Trading Jockey Yesterday at 6:56 pm

» NATIONS TRUST BANK PLC (NTB.N0000)
by chathura123 Yesterday at 3:53 pm

» UNHCR Fear is over 21 countries speak for us only 15 against
by Vishwanarth Yesterday at 11:14 am

» Daily Foreign Transactions
by Mithooshan Yesterday at 7:31 am

» SOFTLOGIC HOLDINGS PLC (SHL.N0000)
by suku502 Yesterday at 12:58 am

» DFCC will be receiving Rs.594,538,285.50
by Wonderer Fri Feb 26, 2021 7:49 pm

» UNHCR එකේ ලොකූ ටෝක දැම්මට සමහර ඔස්තාර් ලා කියන ආර්තික සම්භාදක අරවා මේවා මුකුත් එන්නේ නැ
by Vishwanarth Fri Feb 26, 2021 6:27 pm

» BROWNS INVESTMENTS PLC (BIL.N0000)
by samaritan Fri Feb 26, 2021 9:45 am

» GLAS will be winner with Super Gain.
by Eranga87 Fri Feb 26, 2021 2:00 am

» If you are one of those people who can sleep at night while someone else is in control of your destiny, then my advice would be to only invest in stocks
by Asoka Samarakone Thu Feb 25, 2021 9:58 pm

» Price prediction on GRAN and TAFL
by Bakkabwoi Thu Feb 25, 2021 6:22 pm

» EXPOLANKA HOLDINGS PLC (EXPO.N0000)
by Vishwanarth Thu Feb 25, 2021 2:54 pm

» Bullish sentiment returns with market regulator's assurance
by Vishwanarth Thu Feb 25, 2021 2:52 pm

» DIPD/HAYC/HAYL
by Wickyz Thu Feb 25, 2021 1:19 pm

» Chart 25.02.2021
by stockback Thu Feb 25, 2021 12:41 pm

» is it a good time to sell expo shares
by Kipling Thu Feb 25, 2021 8:39 am

» Current 2021 Februray Unit Trust/Unit Fund Per Annum percentages
by agentnrox Thu Feb 25, 2021 8:13 am

EXPERT CHRONICLE™

ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

CHRONICLE™ NEWS PRODUCTS

FINANCIAL CHRONICLE™

Views & Reviews, Analysis, Evaluations, Discussions, Gossip and Hot Tips relating to Sri Lankan companies listed on the Colombo Stock Exchange (CSE)
Contribute




DAILY CHRONICLE™

Latest news and articles published in Newspapers, Websites, Blogs and other online news sites relating to business and investments in Sri Lanka
Contribute



ECONOMIC CHRONICLE™

This is a section that provide news, views, analysis, predications relating to Political and Socio-Economic factors and how such activities affect the Stock Market and other economic activity of the Country.

Contribute




EXPERT CHRONICLE™

This is an exclusive section for Expert Articles which will help member to share knowledge through comments and responses of the members. All members are allowed to reply and make comments to these articles.

Contribute


Submit Post


CHRONICLE™ YouTube

Youtube Videos and other visual presentations relating Stock market and other investment advise submitted by members or other contributors.

Contribute


Submit Post


කොළඔ කොටස් වෙළඳපොළේ වංශකථාව
කොළඔ කොටස් වෙළඳපොළේ ලැයිස්තුගත සමාගම් කොටස් ගැන තොරතුරු¸විශ්ලේෂණ¸සාකච්ඡා¸ කටකතා¸රසකතා යන සියල්ල අපේම සිංහලෙන් කතා කළ හැකි ‘කතා මණ්ඩපය’

Contribute

Twitter Feeds
POPULAR COMPANIES
A

ABANS ELECTRICALS PLC

ACCESS ENGINEERING PLC Hot

ACL CABLES PLC

ACL PLASTICS PLC

ACME PRINTING & PACKAGING PLC

AGSTAR PLC

AITKEN SPENCE HOTEL HOLDINGS PLC

AITKEN SPENCE PLC

ANILANA HOTELS AND PROPERTIES PLC

ARPICO INSURANCE PLC

ASIA ASSET FINANCE PLC

ASIA CAPITAL PLC

B

BAIRAHA FARMS PLC

BALANGODA PLANTATIONS PLC

BIMPUTH FINANCE PLC

BLUE DIAMONDS JEWELLERY WORLDWIDE PLC

B P P L HOLDINGS PLC

BROWNS BEACH HOTELS PLC

BROWNS INVESTMENTS PLC

C

CARGO BOAT DEVELOPMENT COMPANY PLC

CENTRAL INDUSTRIES PLC

CEYLON COLD STORES PLC

CEYLON GRAIN ELEVATORS PLC Hot

CEYLON TEA BROKERS PLC

CEYLON TOBACCO COMPANY PLC

CHEVRON LUBRICANTS LANKA PLC

COLOMBO FORT LAND & BUILDING PLC

COMMERCIAL BANK OF CEYLON PLC

CITRUS LEISURE PLC Hot

COMMERCIAL CREDIT AND FINANCE PLC

D

DANKOTUWA PORCELAIN PLC

DFCC BANK PLC

DIALOG AXIATA PLC

DIALOG FINANCE PLC

DIPPED PRODUCTS PLC

DISTILLERIES COMPANY OF SRI LANKA PLC

DUNAMIS CAPITAL PLC

E

EAST WEST PROPERTIES PLC Hot

EASTERN MERCHANTS PLC

EXPOLANKA HOLDINGS PLC

E-CHANNELLING PLC

F

FIRST CAPITAL HOLDINGS PLC

G

GALADARI HOTELS (LANKA) PLC

GUARDIAN CAPITAL PARTNERS PLC

H

HATTON NATIONAL BANK PLC

HAYLEYS PLC

HAYLEYS FABRIC PLC

HAYLEYS FIBRE PLC Hot

HEMAS HOLDINGS PLC

HIKKADUWA BEACH RESORT PLC

HNB ASSURANCE PLC

HVA FOODS PLC

J

JANASHAKTHI INSURANCE COMPANY PLC

JOHN KEELLS HOLDINGS PLC Hot

JOHN KEELLS HOTELS PLC

L

LANKA ASHOK LEYLAND PLC

LANKA IOC PLC

LANKEM CEYLON PLC

LANKEM DEVELOPMENTS PLC

LAUGFS GAS PLC

LAUGFS POWER LIMITED

LOLC FINANCE PLC

LOLC HOLDINGS PLC

LUCKY LANKA MILK PROCESSING COMPANY PLC

M

MELSTACORP PLC

N

NATIONAL DEVELOPMENT BANK PLC

NATION LANKA FINANCE PLC

NESTLE LANKA PLC

O

ORIENT FINANCE PLC

OVERSEAS REALTY (CEYLON) PLC

P

PANASIAN POWER PLC

PEOPLE'S LEASING & FINANCE PLC

PIRAMAL GLASS CEYLON PLC

PRIME FINANCE PLC

R

RAIGAM WAYAMBA SALTERNS PLC

RENUKA AGRI FOODS PLC

RENUKA CAPITAL PLC

RENUKA HOLDINGS PLC

RICHARD PIERIS AND COMPANY PLC

RICHARD PIERIS EXPORTS PLC Hot

ROYAL CERAMICS PLC

S

SAMPATH BANK PLC

SEYLAN BANK PLC

SIERRA CABLES PLC

SINGHE HOSPITALS PLC Hot

SMB LEASING PLC

SOFTLOGIC HOLDINGS PLC

SOFTLOGIC LIFE INSURANCE PLC

SRI LANKA TELECOM PLC

SWISSTEK (CEYLON) PLC Hot

T

TEEJAY LANKA PLC

TESS AGRO PLC

THREE ACRE FARMS PLC

TOKYO CEMENT COMPANY (LANKA) PLC Hot

U

UNION BANK OF COLOMBO PLC

V

VALLIBEL FINANCE PLC

VALLIBEL ONE PLC Hot

VALLIBEL POWER ERATHNA PLC

W

WASKADUWA BEACH RESORT PLC


You are not connected. Please login or register

FINANCIAL CHRONICLE™ » CHRONICLE™ ANALYTICS » Financial Ratio Analysis - Part 2

Financial Ratio Analysis - Part 2

Go down  Message [Page 1 of 1]

1Financial Ratio Analysis - Part 2 Empty Financial Ratio Analysis - Part 2 Mon Jan 02, 2012 3:22 am

sriranga

sriranga
Co-Admin
Investment Ratio Analysis & Example
This is used by shareholders or investors to calculate the return on their investments, and to make good decisions about which shares to buy...

List of Investment Ratios and Formulas:
1. Dividend cover = Profit after tax / dividends
2. Dividend yield = ( Dividend per share/ Market price per share ) * 100 %
3. Earnings per share (EPS) = Profit available to equity shareholders / Number ofequity shares
4. Price earnings ratio (P/E) = Market price per share / Earnings per share
5. Price to sales ratio = Market price per share / Sales per share
6. Price earnings growth (PEG) ratio = Price per earnings / Annual EPS growth
7. Price to book value (PBV) = Market price per share / Balance sheet price per share
8. Payout Ratio = Dividend per share / EPS

Examples:
1) Camry Ltd made a net profit of $80,000 that is available to ordinaryshareholders, and the dividend declared is $20,000, then:
Dividend cover = 80,000 / 20,000 = 4 times
2) An investor bought a share at $6.00 and he received a dividend of $0.30 on it, then:
Dividend yield = (0.30 / 6.00) * 100 % = 5 %
3) Company ABC has an annual earning of $140,000 dollars. Total dividends of $70,000 are to be paid out, and the company has 350,000 outstanding shares.

Solution:
Earnings per share (EPS) = $140,000 / 350,000 = $0.40
Dividend per share = 70,000 / 350,000 = $0.20
The dividend payout ratio = 0.20 / 0.40 = 50%

4) Sports Ltd has ordinary share capital of 200,000 shares at $1 each. It made a net profit of $400,000 that is available to the ordinary shareholders. The market price of a share is $6.00.
Then:
EPS = $400,000 / 200,000 = $2 per share
P/E ratio = $6 / $2 = 3

Financial Leverage Ratio Analysis
This is used to assess the financial position of a company in terms of its financial stability. It gives an indication of the firm's ability in repaying its long-term debts...

Definition: Financial Leverage Ratio (also called long-term solvency ratio) is used to measure the firm's ability to repay its long-term debts. It gives an indication of the long-term solvency of the firm.

List of Financial Leverage Ratios and Formulas:
1) Debt to Equity = Total Debt / Total Equity
2) Total Debts to Assets = Total Liabilities / Total Assets
3) Interest Coverage Ratio = Earnings Before Interest and Taxes / Interest Charges
4) Debt service coverage ratio = Net Operating Income / Total Debt Service
5) Capitalization Ratio = Long-term Debt / (Long-term debt + Shareholder equity)

Learn how to calculate financial leverage ratio with the following examples:

Example 1:
CK Ltd has total liabilities of $700,000 and total stockholders' equity of $380,000, then the debt/capital ratio is: 700,000 / (700,000 + 380,000) = 700,000 / 1,080,000 = 0.6481 = 64.81%

Example 2:
Saint Ltd. is looking at an investment property with a net operating income of $87,000 and an annual debt service of $58,000. The debt service coverage ratio for this property = 87,000 / 58,000 = 1.5

Example 3:
Jimmy plc has total sales revenue of $99,000 for the year. It has cost sales $9,000 and operating expenses of $5,000. The company's interest expense for the year is $25,000.

Then,
Earnings Before Interest and Taxes = Sales – Cost of sales – Operating expenses
EBIT = $99,000 - $9,000 - $5,000
EBIT = $85,000
Interest Coverage Ratio = $85,000/$25,000 = 3.4 times

Example 4:
Peters Ltd has the following information:
Creditors $2,000
Loan $38,000
Buildings $60,500
Debtors $7,000
Bank $5,000
Stocks $4,500

Then, the Total Liabilities = 2,000 + 38,000 = $40,000
Total Assets = 60,500 + 7,000 + 5,000 + 4,500 = $77,000
Total Debts to Assets = 40,000 / 77,000 = 0.519


Profitability Ratio Analysis & Example
This is used to assess the profitability of a business in relation to its past performance, or in relation to other companies in the same industry...

List of Profitability Ratios and Formulas:
1. Gross Profit ratio = (Gross profit / Net sales) * 100 %
2. Net Profit ratio = (Net profit / Net sales) * 100 %
3. Operating profit margin = Operating income / Net sales
4. Return on Capital Employed = (Profit before interest / Capital employed) * 100 %
5. Return on Equity (ROE) = Net income / Average shareholders equity
6. Return on Assets (ROA) = Net income / Total assets
7. Cash flow return on investment (CFROI) = Cash flow / Market recapitalisation
8. Risk adjusted return on capital (RAROC) = Expected return / Economic capital
9. Return on net assets = Net income / Net assets

Example:
Calculate the profitability ratios, given the following figures:
Stock at the start of the year: $10,000
Stock at the end of the year: $6,000
Sales: $18,000
Sales returns: $3,000
Purchases: $2,000
Overhead expenses: $3,000
Capital at start of year: $17,000
Capital at end of year: $15,000

Solution:
Net sales = $18,000 - $3,000 = $15,000
Cost of sales = Stock at start + purchases - Stock at end = 10,000 + 2,000 - 6,000 = $6,000
Gross profit = Net sales - Cost of sales = $15,000 - $6,000 = $11,000
Gross profit ratio = (11,000 / 15,000 ) * 100% = 73.33 %
Net profit = Gross profit - overhead expenses = 11,000 - 3,000 = $8,000
Net profit ratio = (8,000 / 15,000 ) * 100% = 53.33 %
Average capital employed = 1/2 (Capital at start + Capital at end) = 1/2 (17,000+15,000) = $16,000
ROCE = (8,000 / 16,000) * 100% = 50%

Efficiency Ratio Analysis & Example
This is used to analyze how efficiently the firm uses and controls its assets and liabilities internally...
Definition: Efficiency Ratios (also known as Activity ratios) are used to measure the effectiveness of the firm's use of resources.

List of Efficiency Ratios and Formula:
1. Average Collection Period = (Average Trade Debtors / Credit Sales) * No. of Days
2. Average Payment Period = (Average Trade Creditors / Credit Purchases) * No. of Days
3. Inventory Turnover Ratio = Cost of goods sold / Average inventory held
4. Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors
5. Total Assets Turnover = Net Sales / Total Assets
6. Degree of Operating Leverage = % change in EBIT / % change in Sales
7. Creditors Turnover Ratio = Net Credit Purchases / Average Payable
8. Days Sales Outstanding Ratio = Accounts Receivable / Average sales per day
9. Working capital turnover Ratio = Cost of sales / Average net working capital
10. Current Asset Turnover Ratio = Cost of goods sold / Current assets
11. Stock Turnover Period = (Average stock / Cost of goods sold) * No. of Days
12. Cash Cycle = Stock Turnover Period + Average Collection Period - AveragePayment Period

Example:
Emily Ltd has the following information:
Trade debtors $100,000
Trade creditors $80,000
Credit sales $300,000
Credit purchases $120,00
Cost of sales $70,000
Opening stock $60,000
Closing stock $20,000
Bank $66,000
Calculate the relevant Efficiency Ratios.

Solution:
Average Collection Period = (100,000 / 300,000) * 365 = 121.7 days
Average Payment Period = (80,000 / 120,000) * 365 = 243.3 days
Current Asset Turnover = 70,000 / (100,000 + 20,000 + 66,000) = 0.38
Average stock = (60,000 + 20,000) / 2 = $40,000
Stock Turnover Period = (40,000 / 70,000) * 365 = 208.6 days
Cash Cycle = 208.6 + 121.7 - 243.3 = 87 days

Liquidity Ratio Analysis & Example
This is used to measure the ability of the firm in meeting its short-term liabilities...

Definition: Liquidity ratios provide a general estimate of solvency of a company.

List of Common Liquidity ratios and Formulas:
1) Current ratio (also known as working capital ratio)
= Current Assets / Current Liabilities
2) Quick ratio, in times (also known as acid test ratio or quick assets ratio)
= (Current Assets - Stock) / Current Liabilities
3) Interest Coverage = Profit Before Tax / Interest Charge
4) Gearing ratio = Long Term Liabilities / Equity Shareholders' Funds
5) Cash Ratio = Cash / Current Liabilities
6) Operating Cash Flow Ratio = Operating Cash Flow / Current Liabilities

Example:
Calculate the working capital, acid test and gearing ratios, given the following figures:
Debtors: $2,000
Creditors: $5,000
Bank: $11,000
Cash: $1,000
Closing stock: $6,000
Opening stock: $7,000
Total Capital and Reserves: $25,000
Long term loan: $15,000

Solution:
Current assets = debtors + bank + cash + closing stock = 2000 + 11000 + 1000 + 6000 = $20,000
Working capital ratio = 20,000 / 5,000 = 4 (This means that current assets are 4 times current liabilities)
Acid test ratio = (20,000 - 6,000) / 5,000 = 2.8 (This means that current assets in liquid form are 2.8 times current liabilities)
Equity Shareholders' Funds = Total Capital and Reserves + Long term Liabilities = 25000 + 15000 = $40,000
Gearing ratio = 15,000 / 40,000 = 0.375

http://forum.srilankaequity.com/t14598-financial-ratio-analysis-part-1#94176
Source:financelearners

http://sharemarket-srilanka.blogspot.co.uk/

2Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Mon Jan 02, 2012 11:32 pm

hirankb

hirankb
Senior Equity Analytic
Senior Equity Analytic
Excellent .
Would appreciate if you could mention good benchmark figures for each ratio in SRI LAnkan context. UK based Figures will be of no use.

3Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Tue Jan 03, 2012 12:16 am

kaka


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
good work sir

4Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Tue Jan 03, 2012 8:44 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Excellent work Sri.. Thanks for sharing..

5Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Wed Jan 04, 2012 2:04 pm

mra

mra
Manager - Equity Analytics
Manager - Equity Analytics
useful for fundamental shares analysis. tks

6Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Wed Jan 04, 2012 2:20 pm

K.Haputantri

K.Haputantri
Co-Admin
I like it. Thanks Sri.

7Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Sun Jan 15, 2012 3:55 pm

Light of Hope


Vice President - Equity Analytics
Vice President - Equity Analytics
thanks mate, excellent

8Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Wed Aug 15, 2012 12:26 pm

kiritharon


Stock Analytic
Stock Analytic
thank you very much for shared your knowledge. It's god's gift given to us a good member like u

9Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Sat Nov 26, 2016 7:11 pm

jehovah

jehovah
Equity Analytic
Equity Analytic
thanks..... Laughing

10Financial Ratio Analysis - Part 2 Empty Re: Financial Ratio Analysis - Part 2 Sun Nov 27, 2016 8:38 am

EquityChamp

EquityChamp
Moderator
Moderator
Good that you guys a digging out old but valuable content. Keep it up...

Sponsored content


Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum