What is Ratio Analysis?

• P/V Ratio is contribution /Sales
• Just ‘Turnover Ratio’ is ‘Capital Turnover Ratio’ i.e. Sales/ Capital Employed
• Net Assets = Fixed Assets + (Current Assets – Current Liabilities) = Capital Employed
• Return on Investment (RoI) is

Return on Capital Employed = Return on Net Assets = PBIT / Capital Employed

If specified as ‘post tax RoI’: RoI = [PBIT (1- T)]/ Capital Employed

{Sometimes RoI is also signified as Return on Total Assets : Use this only if specified this way}

• Debtors Velocity = Debtors Collection Period = ACP

Debtors Turnover = Sales / Debtors = 12 / ACP_months = 360 / ACP_daysM