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
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller kbzone. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.99. You're not tied to anything after your purchase.
