Send notes on all ratios analysis covered in business studies

Ratio analysis involves interpreting financial statements to assess a company's financial health across various aspects, including its performance, stability, and efficiency. Here are the main categories of ratios covered in business studies:

1. Profitability Ratios
These ratios measure a company's ability to generate profit from its sales and assets, indicating its overall financial performance.

• Gross Profit Margin: $\frac{\text{Gross Profit}}{\text{Revenue}} \times 100\%$
• Net Profit Margin: $\frac{\text{Net Profit}}{\text{Revenue}} \times 100\%$
• Return on Capital Employed (ROCE): $\frac{\text{Net Profit before Interest and Tax}}{\text{Capital Employed}} \times 100\%$

2. Liquidity Ratios
Liquidity ratios assess a company's capacity to meet its short-term financial obligations, ensuring it has enough current assets to cover current liabilities.

• Current Ratio: $\frac{\text{Current Assets}}{\text{Current Liabilities}}$
• Acid Test Ratio (Quick Ratio): $\frac{\text{Current Assets - Inventory}}{\text{Current Liabilities}}$

3. Solvency Ratios (Gearing/Leverage Ratios)
These ratios evaluate a company's ability to meet its long-term financial obligations and indicate its reliance on debt financing.

• Gearing Ratio: $\frac{\text{Long-term Liabilities}}{\text{Capital Employed}} \times 100\%$
• Debt to Equity Ratio: $\frac{\text{Total Debt}}{\text{Shareholder's Equity}}$

4. Efficiency Ratios (Activity Ratios)
Efficiency ratios measure how effectively a company uses its assets and manages its operations to generate sales or cash.

• Inventory Turnover: $\frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$ (in times) or $\frac{365}{\text{Inventory Turnover}}$ (in days)
• Debtor Days (Receivables Turnover Period): $\frac{\text{Trade Receivables}}{\text{Credit Sales}} \times 365 \text{ days}$
• Creditor Days (Payables Turnover Period): $\frac{\text{Trade Payables}}{\text{Cost of Sales}} \times 365 \text{ days}$

5. Investor Ratios (Market Ratios)
Investor ratios are used by shareholders and potential investors to evaluate the attractiveness and performance of a company's shares in the market.

• Earnings Per Share (EPS): $\frac{\text{Net Profit after Tax and Preference Dividends}}{\text{Number of Ordinary Shares Issued}}$
• Price/Earnings (P/E) Ratio: $\frac{\text{Market Price Per Share}}{\text{Earnings Per Share}}$
• Dividend Yield: $\frac{\text{Dividend Per Share}}{\text{Market Price Per Share}} \times 100\%$