Economics – Accounting Ratio

DESCRIPTION OF FORMULA IDEAL REMARKS
RATIO RATIO
A-LIQUIDITY RATIOS
Current Ratio 2:1 Current Assets = Current Investments + Inventories(Excluding
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 Stores And Spares And Loose Tools) + Trade Receivables (Net Of
=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 Provision For Doubtful Debts) + Cash And Cash Equivalents + Short
Term Loans And Advances + Other Current Assets
Current Liability= Short Term Borrowings + Trade Payables +
Other Current Liabilities + Short Term Provisions
Liquidity Ratio 1:1 Quick Assets = Current Assets – Inventories - Prepaid Expenses –
𝐿𝑖𝑞𝑢𝑖𝑑 𝑜𝑟 𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡𝑠 Advance Tax
= Current Liabilities Have Same Meaning As In Current Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
B-SOLVENCY RATIOS
Debt Equity Ratio 2:1 Debt = Long Term Borrowings(I.E, Debentures, Mortagage, Public
𝐷𝑒𝑏𝑡 Deposits) + Long Term Provisions
= Shareholder’s Fund = Share Capital + Reserve & Surplus
𝐸𝑞𝑢𝑖𝑡𝑦
Or
Non Current Assets (Tangible + Intangible + Non Current
Investments + Long Term Loans And Advances)
+Working Capital – Non Current Liabilities.
Working Capital = Current Assets – Current Liabilities
Total Assets to Debt 2:1 Total Assets = Non Current Assets(Tangible + Intangible + Non
Ratio 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 Current Investments + Long Term Loans And Advances) + Current
= Assets(Current Investments + Inventories(Including Stores And
𝐷𝑒𝑏𝑡
Spares And Loose Tools) + Trade Receivables + Cash And Cash
Equivalents + Short Term Loans And Advances + Other Current
Assets
Debt to Total Assets 𝐷𝑒𝑏𝑡 Same As Above
Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Proprietary Ratio 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐹𝑢𝑛𝑑 50% Shareholder’s Fund = Share Capital + Reserve & Surplus
= Total Assets Has The Same Meaning As In Total Assets To Debt
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Ratio.



Accountancy by Yashdeep Chaturvedi- +91-7007705331