What Financial Ratios are used in the Company Watch system?
The following definitions refer to standard financial ratios given in the Company Watch system and use raw data from the accounts. No H-Score analysis is used in the calculation of these ratios.
UK definitions
Profitability
| Ratio | Formula |
|---|---|
| Operating margin (%) | (Operating profit / Sales) x 100 |
| Pre-tax margin (%) | (PBT / Sales) x 100 |
| Return on Net Worth (%) | (PBT / Net Worth) x 100 |
| Return on capital employed | ((PBT + Interest paid ) / (Total Assets - Current liabilities)) x 100 |
| Return on Assets (%) | ((PBT + Interest paid) / Total Assets) x 100 |
| Interest cover | (Operating profit + Interest & other income) / Interest paid |
| Dividend cover | (Profit after tax + Other post-tax items) / Dividends |
| Tax rate | (Tax / PBT) x 100 |
Trading/Funding
| Ratio | Formula |
|---|---|
| Sales: Tangible fixed assets | Sales / (Fixed assets – Other fixed assets – Intangibles) |
| Sales: Net Worth | Sales / Net Worth |
| Gearing (%) | ((Short term debt + Long term debt – Cash) / Net Worth) x 100 |
Liquidity
| Ratio | Formula |
|---|---|
| Current ratio | Current assets / Current liabilities |
| Acid Test Ratio | (Current assets – Stock & WIP) / Current liabilities |
Working Capital: Sales
| Ratio | Formula |
|---|---|
| Stock days | (Stock & WIP x 365) / Sales |
| Trade debtor days | (Trade debtors x 365) / Sales |
| All other debtor days | ((Other debtors + Group debtors) x 365) / Sales |
| Trade creditor days | (Trade creditors x 365) / Sales |
| All other creditor days | ((Other creditors + Accruals & deferred income + Group creditors x 365) / Sales |
Employees
| Ratio | Formula |
|---|---|
| Sales per head | Sales / Employee numbers |
| PBT per head | PBT / Employee numbers |
| Employee costs per head | Employee costs / Employee numbers |
Other Ratios
| Ratio | Formula |
|---|---|
| Tangible debt gearing (%) | ((Short term debt + Long term debt)/(Net worth – Intangible fixed assets)) x 100 |
| Leverage | ((Current liabilities + Long term liabilities)/(Net worth – Intangible fixed assets)) x 100 |
IE definitions
Profitability
| Ratio | Formula |
|---|---|
| Operating margin (%) | (Operating profit / Sales) x 100 |
| Pre-tax margin (%) | (PBT / Sales) x 100 |
| Return on Net Worth (%) | (PBT / Net Worth) x 100 |
| Return on capital employed | ((PBT + Interest paid ) / (Total Assets - Current liabilities)) x 100 |
| Return on Assets (%) | ((PBT + Interest paid) / Total Assets) x 100 |
| Interest cover | (Operating profit + Interest & other income) / Interest paid |
| Dividend cover | (Profit after tax + Other post-tax items) / Dividends |
| Tax rate | (Tax / PBT) x 100 |
Trading/Funding
| Ratio | Formula |
|---|---|
| Sales: Tangible fixed assets | Sales / (Fixed assets – Other fixed assets – Intangibles) |
| Sales: Net Worth | Sales / Net Worth |
| Gearing (%) | ((Short term debt + Long term debt – Cash) / Net Worth) x 100 |
Liquidity
| Ratio | Formula |
|---|---|
| Current ratio | Current assets / Current liabilities |
| Acid Test Ratio | (Current assets – Stock & WIP) / Current liabilities |
Working Capital: Sales
| Ratio | Formula |
|---|---|
| Stock days | (Stock & WIP x 365) / Sales |
| Trade debtor days | (Trade debtors x 365) / Sales |
| All other debtor days | ((Other debtors + Group debtors) x 365) / Sales |
| Trade creditor days | (Trade creditors x 365) / Sales |
| All other creditor days | ((Other creditors + Accruals & deferred income + Group creditors x 365) / Sales |
Employees
| Ratio | Formula |
|---|---|
| Sales per head | Sales / Employee numbers |
| PBT per head | PBT / Employee numbers |
| Employee costs per head | Employee costs / Employee numbers |
Other Ratios
| Ratio | Formula |
|---|---|
| Tangible debt gearing (%) | ((Short term debt + Long term debt)/(Net worth – Intangible fixed assets)) x 100 |
| Leverage | ((Current liabilities + Long term liabilities)/(Net worth – Intangible fixed assets)) x 100 |