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:

  1. Horizontal and Vertical Analysis
  2. Ratios Analysis
  3. Horizontal Analysis or Trend Analysis
  4. Trend Percentage
  5. Vertical Analysis
  6. Accounting Ratios Definition, Advantages, Classification and Limitations:
  7. Gross profit ratio
  8. Net profit ratio
  9. Operating ratio
  10. Expense ratio
  11. Return on shareholders investment or net worth
  12. Return on equity capital
  13. Return on capital employed (ROCE) Ratio
  14. Dividend yield ratio
  15. Dividend payout ratio
  16. Earnings Per Share (EPS) Ratio
  17. Price earning ratio
  18. Current ratio
  19. Liquid/Acid test/Quick ratio
  20. Inventory/Stock turnover ratio
  21. Debtors/Receivables turnover ratio
  22. Average collection period
  23. Creditors/Payable turnover ratio
  24. Working capital turnover ratio
  25. Fixed assets turnover ratio
  26. Over and under trading
  27. Debt-to-equity ratio
  28. Proprietary or Equity ratio
  29. Ratio of fixed assets to shareholders funds
  30. Ratio of current assets to shareholders funds
  31. Interest coverage ratio
  32. Capital gearing ratio
  33. Over and under capitalization
  34. Financial-Accounting- Ratios Formulas
  35. Limitations of Financial Statement Analysis


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