Current Assets to Proprietor’s Fund Ratio
Current Assets to Proprietor’s Fund Ratio:
Current Assets to Proprietors’ Fund Ratio establishes the relationship between current assets and shareholder’s funds.
The purpose of this ratio is to calculate the percentage of shareholders funds invested in current assets.
Formula:
Current Assets to Proprietors Funds = Current Assets / Proprietor’s Funds
Example:
This may be expressed either as a percentage , or as a proportion. To illustrate, if the value of current assets is $36,000 and the proprietors funds are $180,000 the relevant ratio would be calculated as follows:
Current Assets to Proprietors Funds = 36,000 / 180,000
= 0.2
This may also be expressed as 20%. It means that 20% of the proprietors funds have been invested in current assets.
Significance:
Different industries have different norms and therefore, this ratio should be studied carefully taking the history of industrial concern into consideration before relying too much on this ratio.
You may also be interested in other articles from “financial statement analysis” chapter:
- Horizontal and Vertical Analysis
- Ratios Analysis
- Horizontal Analysis or Trend Analysis
- Trend Percentage
- Vertical Analysis
- Accounting Ratios Definition, Advantages, Classification and Limitations:
- Gross profit ratio
- Net profit ratio
- Operating ratio
- Expense ratio
- Return on shareholders investment or net worth
- Return on equity capital
- Return on capital employed (ROCE) Ratio
- Dividend yield ratio
- Dividend payout ratio
- Earnings Per Share (EPS) Ratio
- Price earning ratio
- Current ratio
- Liquid/Acid test/Quick ratio
- Inventory/Stock turnover ratio
- Debtors/Receivables turnover ratio
- Average collection period
- Creditors/Payable turnover ratio
- Working capital turnover ratio
- Fixed assets turnover ratio
- Over and under trading
- Debt-to-equity ratio
- Proprietary or Equity ratio
- Ratio of fixed assets to shareholders funds
- Ratio of current assets to shareholders funds
- Interest coverage ratio
- Capital gearing ratio
- Over and under capitalization
- Financial-Accounting- Ratios Formulas
- Limitations of Financial Statement Analysis
Other Related Accounting Articles:
- Fixed Assets to Proprietor’s Fund Ratio
- Fixed Assets Turnover Ratio
- Proprietary Ratio or Equity Ratio
- Return on Shareholders Investment or Net Worth Ratio
- Over trading and Under Trading
- Return on Equity Capital (ROEC) Ratio
- Dividend Yield Ratio
- Dividend Payout Ratio
- Debt Service Ratio or Interest Coverage Ratio
- Financial Accounting Ratios & Formulas
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