Audit Ratio
Formula to calculate audit ratio:
Audit Ratio = audit costs / sales
Audit ratio definition and explanation:
A high audit ratio indicates that more audit time was required because of problems with the company's accounting records or control procedures.
The audit ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Wednesday, February 3, 2010
Altman z-score
Altman z-score
Formula to calculate Altman's Z-Score:
z-score = 1.2 a + 1.4 b + 3.3 c + d/e+.6f/g
where :
a = working capital,
b = retained earnings,
c = operating income,
d = sales,
e = total assets,
f = net worth and
g = total debt
Altman z-score definition and explanation:
The Altman z-score is a bankruptcy prediction calculation.
The z-score measures the probability of insolvency (inability to pay debts as they become due).
1.8 or less indicates a very high probability of insolvency.
1.8 to 2.7 indicates a high probability of insolvency.
2.7 to 3.0 indicates possible insolvency.
3.0 or higher indicates that insolvency is not likely.
The Altman z - score is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate Altman's Z-Score:
z-score = 1.2 a + 1.4 b + 3.3 c + d/e+.6f/g
where :
a = working capital,
b = retained earnings,
c = operating income,
d = sales,
e = total assets,
f = net worth and
g = total debt
Altman z-score definition and explanation:
The Altman z-score is a bankruptcy prediction calculation.
The z-score measures the probability of insolvency (inability to pay debts as they become due).
1.8 or less indicates a very high probability of insolvency.
1.8 to 2.7 indicates a high probability of insolvency.
2.7 to 3.0 indicates possible insolvency.
3.0 or higher indicates that insolvency is not likely.
The Altman z - score is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Payment Period to Operating Cycle Ratio
Payment Period to Operating Cycle Ratio
Formula to calculate payment period to operating cycle
Payment Period to Operating Cycle = payment period / (average inventory period + collection period).
Payment period to operating cycle ratio definition and explanation:
A payment period to operating cycle ratio above 1:1 (100%) indicates that the inventory is sold and collected before it is paid for (inventory does not need to be financed).
A high payment period to operating cycle ratio indicates that the company may be vulnerable to tightened terms of payments from their suppliers.
(the average inventory period is also known as the inventory holding period)
Formula to calculate payment period to operating cycle
Payment Period to Operating Cycle = payment period / (average inventory period + collection period).
Payment period to operating cycle ratio definition and explanation:
A payment period to operating cycle ratio above 1:1 (100%) indicates that the inventory is sold and collected before it is paid for (inventory does not need to be financed).
A high payment period to operating cycle ratio indicates that the company may be vulnerable to tightened terms of payments from their suppliers.
(the average inventory period is also known as the inventory holding period)
Payment Period to Average Inventory Period Ratio
Payment Period to Average Inventory Period Ratio
Payment Period to Average Inventory Period = payment period / average inventory period
A payment period to average inventory period above 1:1 (100%) indicates that the inventory is sold before it is paid for (inventory does not need to be financed).
(the average inventory period is also known as the inventory holding period)
Payment Period to Average Inventory Period = payment period / average inventory period
A payment period to average inventory period above 1:1 (100%) indicates that the inventory is sold before it is paid for (inventory does not need to be financed).
(the average inventory period is also known as the inventory holding period)
Payment Period Ratio
Payment Period Ratio
Formula to calculate payment period:
Payment Period = (365 days x supplies payable) / inventory.
Payment period definition and explanation:
The payment period indicates the average period for paying debts related to inventory purchases.
Formula to calculate payment period:
Payment Period = (365 days x supplies payable) / inventory.
Payment period definition and explanation:
The payment period indicates the average period for paying debts related to inventory purchases.
Operating Cycle Ratio
Operating Cycle Ratio
Formula to calculate operating cycle:
Operating Cycle = age of inventory + collection period.
Operating cycle definition and explanation:
The operating cycle is the number of days from cash to inventory to accounts receivable to cash.
The operating cycle reveals how long cash is tied up in receivables and inventory.
A long operating cycle means that less cash is available to meet short term obligations.
Formula to calculate operating cycle:
Operating Cycle = age of inventory + collection period.
Operating cycle definition and explanation:
The operating cycle is the number of days from cash to inventory to accounts receivable to cash.
The operating cycle reveals how long cash is tied up in receivables and inventory.
A long operating cycle means that less cash is available to meet short term obligations.
Number of Days Inventory Ratio
Number of Days Inventory Ratio
Formula to calculate number of days inventory:
Number of Days Inventory = 365 days / inventory turnover ratio.
Number of days inventory ratio definition and explanation:
The number of days inventory is also known as average inventory period and inventory holding period.
A high number of days inventory indicates that their is a lack of demand for the product being sold.
A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands.
Formula to calculate number of days inventory:
Number of Days Inventory = 365 days / inventory turnover ratio.
Number of days inventory ratio definition and explanation:
The number of days inventory is also known as average inventory period and inventory holding period.
A high number of days inventory indicates that their is a lack of demand for the product being sold.
A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands.
Revenue per Employee / Net Sales per Employee
Revenue per Employee / Net Sales per Employee
Revenue per employee (net sales per employee) = net sales / number of employees
This ratio indicate the average revenue generated per person employed.
Revenue per employee (net sales per employee) = net sales / number of employees
This ratio indicate the average revenue generated per person employed.
Margin of Safety Ratio
Margin of Safety Ratio
Formula to calculate margin of safety ratio:
Margin of Safety Ratio = (expected sales - breakeven sales) / breakeven sales.
Margin of safety ratio definition and explanation:
The margin of safety ratio shows the percent by which sales exceed the breakeven point.
Formula to calculate margin of safety ratio:
Margin of Safety Ratio = (expected sales - breakeven sales) / breakeven sales.
Margin of safety ratio definition and explanation:
The margin of safety ratio shows the percent by which sales exceed the breakeven point.
Days of Liquidity Ratio
Days of Liquidity Ratio
Formula to calculate days of liquidity:
Days of Liquidity = (quick assets x 365 days) / years cash expenses.
Days of liquidity definition and explanation:
The days of liquidity ratio indicates the number of days that highly liquid assets can support without further cash coming from cash sales or collection of receivables.
Formula to calculate days of liquidity:
Days of Liquidity = (quick assets x 365 days) / years cash expenses.
Days of liquidity definition and explanation:
The days of liquidity ratio indicates the number of days that highly liquid assets can support without further cash coming from cash sales or collection of receivables.
Collection Period to Payment Period Ratio
Collection Period to Payment Period Ratio
Formula to calculate collection period to payment period ratio:
Collection Period to Payment Period = collection period / payment period.
Collection period to payment period ratio explanation and definition:
The collection period to payment period above 1:1 (100%) indicates that suppliers are being paid more rapidly than the company is collecting from their customers.
Formula to calculate collection period to payment period ratio:
Collection Period to Payment Period = collection period / payment period.
Collection period to payment period ratio explanation and definition:
The collection period to payment period above 1:1 (100%) indicates that suppliers are being paid more rapidly than the company is collecting from their customers.
Fixed Charge Coverage Ratio
Fixed Charge Coverage Ratio
Formula to calculate fixed charge coverage ratio:
Fixed Charge Coverage Ratio = (Net Income Before Interest and Taxes + interest + fixed costs) / fixed costs.
Fixed charge coverage ratio definition and explanation:
The fixed charge coverage ratio indicates the risk involved in ability to pay fixed costs when business activity falls.
The fixed charge coverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
The fixed charge coverage ratio is listed in our efficiency ratios.
Formula to calculate fixed charge coverage ratio:
Fixed Charge Coverage Ratio = (Net Income Before Interest and Taxes + interest + fixed costs) / fixed costs.
Fixed charge coverage ratio definition and explanation:
The fixed charge coverage ratio indicates the risk involved in ability to pay fixed costs when business activity falls.
The fixed charge coverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
The fixed charge coverage ratio is listed in our efficiency ratios.
Cash Turnover Ratio
Cash Turnover Ratio
Formula to calculate cash turnover ratio:
Cash Turnover = (cost of sales {excluding depreciation}) / cash.
Cash Turnover Ratio = (365 days)/ cash balance ratio.
Cash turnover ratio definition and explanation:
The cash turnover ratio indicates the number of times that cash turns over in a year.
Formula to calculate cash turnover ratio:
Cash Turnover = (cost of sales {excluding depreciation}) / cash.
Cash Turnover Ratio = (365 days)/ cash balance ratio.
Cash turnover ratio definition and explanation:
The cash turnover ratio indicates the number of times that cash turns over in a year.
Cash Reinvestment Ratio
Cash Reinvestment Ratio
Formula to calculate cash reinvestment ratio:
Cash Reinvestment Ratio = increases in fixed assets and working capital / (net income + depreciation).
Cash reinvestment ratio definition and explanation:
This ratio indicates the degree to which net income is absorbed (reinvested) in the business.
A cash reinvestment ratio of greater than 1:1 (100%) indicates that more cash is being use4d in the business than being obtained.
The cash reinvestment ratio is included in many of the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate cash reinvestment ratio:
Cash Reinvestment Ratio = increases in fixed assets and working capital / (net income + depreciation).
Cash reinvestment ratio definition and explanation:
This ratio indicates the degree to which net income is absorbed (reinvested) in the business.
A cash reinvestment ratio of greater than 1:1 (100%) indicates that more cash is being use4d in the business than being obtained.
The cash reinvestment ratio is included in many of the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Cash Maturity Coverage Ratio
Cash Maturity Coverage Ratio
Formula to calculate cash maturity coverage ratio:
Cash Maturity Coverage = (cash flow from operations - dividends) / current portion of long term maturities.
Cash maturity coverage ratio definition and explanation:
The cash maturity coverage ratio indicates the ability to repay long term maturities as they mature.
The cash maturity coverage ratio indicates whether long term debt maturities are in time with operating cash flow.
The cash maturity coverage ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate cash maturity coverage ratio:
Cash Maturity Coverage = (cash flow from operations - dividends) / current portion of long term maturities.
Cash maturity coverage ratio definition and explanation:
The cash maturity coverage ratio indicates the ability to repay long term maturities as they mature.
The cash maturity coverage ratio indicates whether long term debt maturities are in time with operating cash flow.
The cash maturity coverage ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Cash Dividend Coverage Ratio
Cash Dividend Coverage Ratio
Formula to calculate cash dividend coverage ratio:
Cash Dividend Coverage = (cash flow from operations) / dividends.
Cash dividend coverage ratio definition and explanation:
The cash dividend coverage ratio reflects the company's ability to meet dividends from operating cash flow.
A cash dividend coverage ratio of less than 1:1 (100 %) indicates that dividends are draining more cash from the business than it is generating.
The cash dividend coverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate cash dividend coverage ratio:
Cash Dividend Coverage = (cash flow from operations) / dividends.
Cash dividend coverage ratio definition and explanation:
The cash dividend coverage ratio reflects the company's ability to meet dividends from operating cash flow.
A cash dividend coverage ratio of less than 1:1 (100 %) indicates that dividends are draining more cash from the business than it is generating.
The cash dividend coverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Cash Breakeven Point
Cash Breakeven Point
Formula to calculate cash breakeven point:
Cash Breakeven Point = (fixed costs - depreciation) / contribution margin per unit.
Cash breakeven point definition and explanation:
The cash breakeven point indicates the minimum amount of sales required to contribute to a positive cash flow.
The cash breakeven point is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate cash breakeven point:
Cash Breakeven Point = (fixed costs - depreciation) / contribution margin per unit.
Cash breakeven point definition and explanation:
The cash breakeven point indicates the minimum amount of sales required to contribute to a positive cash flow.
The cash breakeven point is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Breakeven Point
Breakeven Point
Formula to calculate breakeven point:
Breakeven Point = fixed costs / contribution margin.
Breakeven point definition and explanation:
The breakeven point is the point at which a business breaks even (incurs neither a profit nor a loss)
The breakeven point is the minimum amount of sales required to make a profit.
Increasing breakeven points (period to period) indicates an increase in the risk of losses.
The breakeven point is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate breakeven point:
Breakeven Point = fixed costs / contribution margin.
Breakeven point definition and explanation:
The breakeven point is the point at which a business breaks even (incurs neither a profit nor a loss)
The breakeven point is the minimum amount of sales required to make a profit.
Increasing breakeven points (period to period) indicates an increase in the risk of losses.
The breakeven point is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Bad Debts Ratio
Bad Debts Ratio
Formula to calculate bad debts ratio:
Bad Debts Ratio = bad debts / accounts receivable.
Bad debts ratio definition and explanation:
The bad debts ratio is an overall measure of the possibility of the business incurring bad debts.
The higher the bad debts ratio, the greater the cost of extending credit.
The bad debts ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate bad debts ratio:
Bad Debts Ratio = bad debts / accounts receivable.
Bad debts ratio definition and explanation:
The bad debts ratio is an overall measure of the possibility of the business incurring bad debts.
The higher the bad debts ratio, the greater the cost of extending credit.
The bad debts ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Average Obligation Period Ratio
Average Obligation Period Ratio
Formula to calculate average obligation period:
Average Obligation Period = accounts payable / average daily purchases.
Average obligation period definition and explantion:
The average obligation period ratio measures the extent to which accounts payable represents current obligations (rather than overdue ones).
The average obligation period ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate average obligation period:
Average Obligation Period = accounts payable / average daily purchases.
Average obligation period definition and explantion:
The average obligation period ratio measures the extent to which accounts payable represents current obligations (rather than overdue ones).
The average obligation period ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Average Inventory Period Ratio
Average Inventory Period Ratio
Formula to calculate average inventory period:
Average Inventory Period = (inventory x 365 days) / cost of sales.
Average inventory period definition and explanation:
The average inventory period is also referred to as Days Inventory and Inventory Holding Period.
This ratio calculates the average time that inventory is held.
Individual inventories should be looked at to find areas where the inventory, and inventory holding period, can be reduced.
The average inventory period should be compared to competitors.
The average inventory period is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate average inventory period:
Average Inventory Period = (inventory x 365 days) / cost of sales.
Average inventory period definition and explanation:
The average inventory period is also referred to as Days Inventory and Inventory Holding Period.
This ratio calculates the average time that inventory is held.
Individual inventories should be looked at to find areas where the inventory, and inventory holding period, can be reduced.
The average inventory period should be compared to competitors.
The average inventory period is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Collection Period (or Average Collection Period) Ratio
Collection Period (or Average Collection Period) Ratio
Formula to calculate (average) collection period:
Collection Period = Accounts Receivable X 365 days /credit Sales
Collection Period = 365 days/ Accounts Receivable Turnover Ratio
The average collection period calculation uses the average accounts receivable over the sales period.
Formula to calculate (average) collection period:
Collection Period = Accounts Receivable X 365 days /credit Sales
Collection Period = 365 days/ Accounts Receivable Turnover Ratio
The average collection period calculation uses the average accounts receivable over the sales period.
Age of Inventory Ratio
Age of Inventory Ratio
Formula to calculate age of inventory ratio:
Age of Inventory = 365 days / inventory turnover ratio
Age of inventory ratio definition and explanation:
The Age of Inventory shows the number of days that inventory is held prior to being sold.
An increasing age of inventory ratio indicates a risk in the company's inability to sell its products. Individual inventory items should be examined for obsolete or overstocked items.
A decreasing age of inventory may represent under-investment in inventory.
The Age of Inventory Ratio is also referred to as the Number of Days Inventory, Days Inventory or Inventory Holding Period.
The Age of Inventory ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate age of inventory ratio:
Age of Inventory = 365 days / inventory turnover ratio
Age of inventory ratio definition and explanation:
The Age of Inventory shows the number of days that inventory is held prior to being sold.
An increasing age of inventory ratio indicates a risk in the company's inability to sell its products. Individual inventory items should be examined for obsolete or overstocked items.
A decreasing age of inventory may represent under-investment in inventory.
The Age of Inventory Ratio is also referred to as the Number of Days Inventory, Days Inventory or Inventory Holding Period.
The Age of Inventory ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Inventory Turnover Ratio
Inventory Turnover Ratio
Formula to calculate inventory turnover ratio:
Inventory Turnover Ratio = cost of goods sold / average inventory.
Inventory turnover ratio definition and explanation:
The inventory turnover ratio measures the number of times a company sells its inventory during the year.
A high inventory turnover ratio indicated that the product is selling well.
The inventory turnover ratio should be done by inventory categories or by individual product.
Formula to calculate inventory turnover ratio:
Inventory Turnover Ratio = cost of goods sold / average inventory.
Inventory turnover ratio definition and explanation:
The inventory turnover ratio measures the number of times a company sells its inventory during the year.
A high inventory turnover ratio indicated that the product is selling well.
The inventory turnover ratio should be done by inventory categories or by individual product.
Inventory Conversion Ratio
Inventory Conversion Ratio
Formula to calculate inventory conversion ratio:
Inventory Conversion Ratio = (sales x 0.5) / cost of sales.
Inventory conversion ratio definition and explanation:
The inventory conversion ratio indicates the extra amount of borrowing that is usually available upon the inventory being converted into receivables.
Formula to calculate inventory conversion ratio:
Inventory Conversion Ratio = (sales x 0.5) / cost of sales.
Inventory conversion ratio definition and explanation:
The inventory conversion ratio indicates the extra amount of borrowing that is usually available upon the inventory being converted into receivables.
Cash Turnover Ratio
Cash Turnover Ratio
Formula to calculate cash turnover ratio:
Cash Turnover = (cost of sales {excluding depreciation}) / cash.
Cash Turnover Ratio = (365 days)/ cash balance ratio.
Cash turnover ratio definition and explanation:
The cash turnover ratio indicates the number of times that cash turns over in a year.
Formula to calculate cash turnover ratio:
Cash Turnover = (cost of sales {excluding depreciation}) / cash.
Cash Turnover Ratio = (365 days)/ cash balance ratio.
Cash turnover ratio definition and explanation:
The cash turnover ratio indicates the number of times that cash turns over in a year.
Formula to calculate asset turnover ratio:
Asset Turnover Ratio
Formula to calculate asset turnover ratio:
Asset Turnover Ratio = sales / fixed assets.
Asset turnover ratio definition and explanation:
A low asset turnover ratio means inefficient utilization or obsolescence of fixed assets, which may be caused by excess capacity or interruptions in the supply of raw materials.
Formula to calculate asset turnover ratio:
Asset Turnover Ratio = sales / fixed assets.
Asset turnover ratio definition and explanation:
A low asset turnover ratio means inefficient utilization or obsolescence of fixed assets, which may be caused by excess capacity or interruptions in the supply of raw materials.
Accounts Payable Turnover Ratio
Accounts Payable Turnover Ratio
Formula to calculate accounts payable turnover ratio:
Accounts Payable Turnover Ratio = total supplier purchases / average accounts payable
Accounts Payable Turnover Ratio definition and explanation:
The accounts payable turnover ratio shows the number of times that accounts payable are paid throughout the year.
A falling accounts payable turnover ratio indicates that the company is taking longer to pay its suppliers.
The accounts payable turnover ratio is listed in our liquidity ratios and turnover ratios.
Formula to calculate accounts payable turnover ratio:
Accounts Payable Turnover Ratio = total supplier purchases / average accounts payable
Accounts Payable Turnover Ratio definition and explanation:
The accounts payable turnover ratio shows the number of times that accounts payable are paid throughout the year.
A falling accounts payable turnover ratio indicates that the company is taking longer to pay its suppliers.
The accounts payable turnover ratio is listed in our liquidity ratios and turnover ratios.
Accounts Receivable Turnover Ratio
Accounts Receivable Turnover Ratio
Formula to calculate Accounts receivable turnover ratio:
Accounts Receivable Turnover Ratio = annual credit sales / average accounts receivable
Accounts Receivable turnover ratio definition and explanation:
This is the ratio of the number of times that accounts receivable amount is collected throughout the year.
A high accounts receivable turnover ratio indicates a tight credit policy.
A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts.
The accounts receivable turnover ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Formula to calculate Accounts receivable turnover ratio:
Accounts Receivable Turnover Ratio = annual credit sales / average accounts receivable
Accounts Receivable turnover ratio definition and explanation:
This is the ratio of the number of times that accounts receivable amount is collected throughout the year.
A high accounts receivable turnover ratio indicates a tight credit policy.
A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts.
The accounts receivable turnover ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
Acid Test Ratio
Acid Test Ratio
Formula to calculate acid test ratio:
Acid Test Ratio = (cash + marketable securities) / current liabilities
Acid test ratio definition and explanation:
The acid test ratio measures the immediate amount of cash immediately available to satisfy short term debt.
Formula to calculate acid test ratio:
Acid Test Ratio = (cash + marketable securities) / current liabilities
Acid test ratio definition and explanation:
The acid test ratio measures the immediate amount of cash immediately available to satisfy short term debt.
1) Liquidity Measurement Ratios
- Current Ratio
- Quick Ratio
- Cash Ratio
- Cash Conversion Cycle
2) Profitability Indicator Ratios
- Profit Margin Analysis
- Effective Tax Rate
- Return On Assets
- Return On Equity
- Return On Capital Employed
3) Debt Ratios
- Overview Of Debt
- Debt Ratio
- Debt-Equity Ratio
- Capitalization Ratio
- Interest Coverage Ratio
- Cash Flow To Debt Ratio
4) Operating Performance Ratios
- Fixed-Asset Turnover
- Sales/Revenue Per Employee
- Operating Cycle
5) Cash Flow Indicator Ratios
- Operating Cash Flow/Sales Ratio
- Free Cash Flow/Operating Cash Ratio
- Cash Flow Coverage Ratio
- Dividend Payout Ratio
6) Investment Valuation Ratios
- Per Share Data
- Price/Book Value Ratio
- Price/Cash Flow Ratio
- Price/Earnings Ratio
- Price/Earnings To Growth Ratio
- Price/Sales Ratio
- Dividend Yield
- Enterprise Value Multiple
- Current Ratio
- Quick Ratio
- Cash Ratio
- Cash Conversion Cycle
2) Profitability Indicator Ratios
- Profit Margin Analysis
- Effective Tax Rate
- Return On Assets
- Return On Equity
- Return On Capital Employed
3) Debt Ratios
- Overview Of Debt
- Debt Ratio
- Debt-Equity Ratio
- Capitalization Ratio
- Interest Coverage Ratio
- Cash Flow To Debt Ratio
4) Operating Performance Ratios
- Fixed-Asset Turnover
- Sales/Revenue Per Employee
- Operating Cycle
5) Cash Flow Indicator Ratios
- Operating Cash Flow/Sales Ratio
- Free Cash Flow/Operating Cash Ratio
- Cash Flow Coverage Ratio
- Dividend Payout Ratio
6) Investment Valuation Ratios
- Per Share Data
- Price/Book Value Ratio
- Price/Cash Flow Ratio
- Price/Earnings Ratio
- Price/Earnings To Growth Ratio
- Price/Sales Ratio
- Dividend Yield
- Enterprise Value Multiple
Tuesday, February 2, 2010
FIN623 - Taxation Management GDB # 5
Q1 A person buys and sells a number of vehicles in a tax year and makes a significant amount of profit in the process. Will such profit be taxable as capital gain?
Q2 A person somehow gets hold of an extraordinary rare bird, keeps it as a pet for two years and then sells it off. Will related profit be taxable as capital gain?
Ans........
Q1....It is the absolutly the capital gain becasue Capital assest has been defined as property of any kind,connected to business or not, but in this case it is the part of its business becase he is actually doing a business of car to buy and sell.
Q.2...
This is also the Capital gain but the key poit in this question is its not connected with his business ,but the bird antiquie according to sec 38 sub 5 ..and the sell of this antique piece is a capital gain.
Note..the 2nd answer could be wrong bz i thing the bird is not a antique bz antique is use for non living items this section includes..following its which is charge as capial gain...
1.A painting,sculpture,drawing or the other work of art...
2.Jewellery
3.A rare manuscript,folio or book.
4.A postage or first day cover
5.A coi or medallion
6.An antique
So now you must have to look at these items, is the bird is part or any items or not...
thankxx
regards
muhammad azeem
leave your comments...
Q2 A person somehow gets hold of an extraordinary rare bird, keeps it as a pet for two years and then sells it off. Will related profit be taxable as capital gain?
Ans........
Q1....It is the absolutly the capital gain becasue Capital assest has been defined as property of any kind,connected to business or not, but in this case it is the part of its business becase he is actually doing a business of car to buy and sell.
Q.2...
This is also the Capital gain but the key poit in this question is its not connected with his business ,but the bird antiquie according to sec 38 sub 5 ..and the sell of this antique piece is a capital gain.
Note..the 2nd answer could be wrong bz i thing the bird is not a antique bz antique is use for non living items this section includes..following its which is charge as capial gain...
1.A painting,sculpture,drawing or the other work of art...
2.Jewellery
3.A rare manuscript,folio or book.
4.A postage or first day cover
5.A coi or medallion
6.An antique
So now you must have to look at these items, is the bird is part or any items or not...
thankxx
regards
muhammad azeem
leave your comments...