# Accounting Ratio’s

Accounting ratios formula , advantages and disadvantages with complete accounting ratio analysis. All profitability ratios , liquidity ratios and financial ratios are covered in Accounting Ratio’s category.

What are Activity Ratios? Activity ratio is the ratio or the measure of the ability of an organization to convert the accounts of the balance sheet into revenues. Activity ratio presents a clear picture of a company’s ability to convert its assets, liability and

Back end ratio is the calculation of the part of the income of an individual or a business that is used to pay the debts. From an individual point of view the monthly debt of an individual include credit card payments, loan payments, home

The measure of the liquidity of a firm over a certain date or for a certain period of time is called current ratio. The maintenance of current ratio is very important for a company as it shows the ability of a company to pay

The price to earnings ratio is the ratio that evaluates the shares produced by the company in the market. The price of earnings ratio is the ratio between the prices of each share to the earnings per share. The price of the share is

This the ratio of the dividend calculated per share to that of the share price of each share. The dividend ratio indicates the percentage of amount an investor or a shareholder is earning per share of a company. The formula of dividend yield ratio

Efficiency ratios are the measure of the degree of the efficiency of a business. Each business runs while utilizing its assets and managing its liabilities. Efficiency ratios of a business are calculated to show how well a business is using its assets and how

The price to sale ratio can be defined as a ratio that compares its stock price to the total revenues of that company. This ratio helps in the valuation of the stock of a company and shows the amount of value placed on

It is the ratio between the EBIT and the total interest paid by the company. The ratio shows the total interest expense of the company that is subtracted from its total earnings before interest and taxes. It is a financial tool that helps in

It is a tool to analyze the financial condition of a company. This is a ratio of that calculates the percentage of the assets of the business that are financed directly from the loans. Sometimes a company has to finance its assets from loans

In order to get a clear picture of the current financial position of a company a tool that is used is called key ratio. It is a ratio that gives us a clear idea about the financial status of a business or an organization.

A bond ratio is one of the most important ratios in accounting and express the leverage associated with the issuer of the bond. In other words bond ratio can be defined as the percentage of the capitalization of a company that is represented

It can be defined as the marginal profit earned by a firm or a business at the sale of each unit of the product. Contribution margin is used to measure the profitability of a product for a company and helps in deciding the future

Business ratios can be explained as financial tools that can help you in finding the weak and erroneous areas of your business. With the help of these ratios you can find out the numerical and financial relationship among different entities of your business. Some

Learning Objectives: Define and explain contribution margin ratio. Calculate CM ratio. What is the importance and benefit of calculating CM ratio? Contribution margin percentage or average Definition of Contribution Margin Ratio Formula Calculation Importance Review Problems Contribution Margin Ratio Calculator Definition of Contribution Margin Ratio: The contribution margin as a percentage of total

Price Earnings Ratio (PE Ratio): Definition: Price earnings ratio (P/E ratio) is the ratio between market price per equity share and earning per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. Components: The basic components for the calculation of gross profit ratio are gross profit and net sales.Net sales means that sales minus sales returns. Gross profit would be the difference betweennet sales and cost of goods sold. Cost of goods sold in

Liquid or Liquidity Ratio / Acid Test or Quick Ratio: Definition: Liquid ratio is also termed as “Liquidity Ratio“, “Acid Test Ratio” or “Quick Ratio“. It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm

Definition of net profit ratio: Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage. Components of net profit ratio: The two basic components of the net profit ratio are the net profit and sales. The net profits are obtained