Ratios

	Voitto+ CD ROM Ratios

	On the Ratios screen you can examine the development of the company’s ratios and compare them with the line of business.

	The ratios screen discloses the ratios calculated from the company’s or consolidated financial statements in the form of tables. The button takes you to the graphics screen, on which you can compare the development of the company’s ratios with other companies or lines of business in graphic form. You get back to the company’s or consolidated financial statements data with the button.

		You can move to the ratios data of the previous or next company you have retrieved to your company list by using the arrow keys.

	Calculation formulas and interpretations for ratios

	The ratios calculated from the financial statements data are disclosed in the table according to whether a long or a shortened version has been available of the profit and loss account.

	Long profit and loss account Turnover Turnover/person Change in turnover in % Gross result/person Change in gross result in % Operating margin in % Operating profit in% Return on investment in % Current Ratio Quick Ratio Equity ratio Return on assets, % Gearing Debt to net sales ratio, % Working capital, % Inventory turnover ratio, % Collection period of trade receivables (days) Payment period of trade payables (days)	Shortened profit and loss account Gross result Gross result/person Change in gross result in% Return on investment in % Current Ratio Quick Ratio Equity ratio Return on assets, % Gearing Collection period of trade receivables (days)

	The ratios have been calculated from the company’s official financial statements, without adjustments. The ratios are not calculated from the financial statements of real estate companies, financial institutions or insurance companies. No ratios of the line of business or payment default risk or bankruptcy risk are calculated for groups. Payment default risk in the line of business Bankruptcy risk in the line of business User instructions: to main page

	Turnover

	The turnover indicates the company’s actual income from business operations, from which the value-added tax and other taxes based directly on the amount of sales have been deducted.

	Turnover/person

	The ratio indicates the amount of turnover that has incurred per one employee. The ratio has been calculated using the formula: turnover (12 months) ---------------------------------------------------------- the average number of personnel in the financial year The ratio is used as the indicator of efficiency, relating to the line of business.

	Change in turnover in %

	The ratio indicates the increase or decrease in turnover in relation to the previous financial year. It can be deducted from the value of the ratio, whether the company’s operations have expanded or reduced in the latest financial year. The ratio is converted to correspond to 12 months, if the financial year deviates from this. The ratio has been calculated using the formula: turnover of the financial year – turnover of the previous financial year —————————————————— x 100 turnover of the previous financial year The ratio is used as the indicator of the development of volume, relating to the line of business.

	Gross result

	The gross result is an intermediate sum, which is acquired as the following items have been added to or deducted from the turnover: “other income from business operations”, “manufacture for own use”; “change in stocks”, “purchases during the financial year”, and “external services”. If the company has presented its profit and loss statement in the so-called shortened form, the above-mentioned items will be left out, and the first item shown in the profit and loss account will be the gross result.

	Gross result/person

	The ratio indicates the amount of gross result that has incurred per one employee. The ratio has been calculated using the formula: gross result (12 months) —————————————————— the average number of employees in the financial year The ratio is used as the indicator of efficiency, relating to the line of business.

	Change in gross result in %

	The ratio indicates the change in gross result compared with the previous financial year; whether the company’s operation has expanded or reduced. The ratio has been calculated using the formula: gross result for the financial year – gross result for the previous financial year ——————————————————x 100 gross result for the previous financial year The ratio is used as the indicator of the development of the volume of operations, and partly of efficiency as well.

	Operating margin in %

	Ratio of profitability. The ratio indicates the result of the company’s business activities before depreciations and financial items. The value of the ratio has to be compared with companies in the same line. The operating margin is calculated from the financial statements in the following way: Depreciations according to plan, reduction in value of goods held as non-current assets and exceptional reduction in value of current assets are added to the operating result. The calculation formula is: operating margin ——————————x 100 turnover Directive values from different lines of business: Trade 2 - 10 % Services 5 - 15 % Industry 10 - 25 %

	Operating profit in %

	Ratio of profitability. The ratio indicates the result of the company before financial items. As the operating margin in %, the ratio is used for indicating the success of the company’s business activities, but it takes better into account the differences between lines of business. The ratio has been calculated using the formula: result for the operations ——————————— x 100 turnover Directive values: over 10 % = good 5 - 10 % = satisfactory under 5 % = poor

	Return on investment %

	The ratio indicates relative profitability, i.e. return, which has been obtained for the capital invested in the company and requiring interest or other returns. The return on investment is a ratio independent from lines of business. The ratio has been calculated using the formula: result before extraordinary items + expenses of liabilities (12 months) —————————————————————————— x 100 (balance sheet total of the newest balance sheet – interest-free debts) (balance sheet total of the previous balance sheet – interest-free debts) / 2 Directive values: over 15 % = good 9 - 15 % = satisfactory 0 - 9 % = passable under 0 % = poor

	Current Ratio

	Ratio of liquidity. The ratio indicates the company’s possibility to meet its short-term debts with current assets and inventories. With the help of this ratio, it is possible to monitor the annual development of the company’s financial standing. The saleability and liquidity of the current assets have to be taken into account when interpreting the ratio. The ratio has been calculated using the formula: current assets + inventories —————————————————— short-term debts Directive values: over 2,0 = good 1,0 - 2,0 = satisfactory under = 1,0 poor

	Quick Ratio

	Ratio of liquidity. The ratio indicates the company’s possibility to meet its short-term debts with current assets. The annual development of the company’s financial standing can be monitored with the help of this ratio. The saleability and liquidity of the current assets have to be taken into account when interpreting the ratio. The ratio has been calculated using the formula: current assets ———————————————— short-term debts – advances received Directive values: over 1,0 = good 0,5 - 1,0 = satisfactory under 0,5 =poor

	Equity ratio

	Ratio of solvency. This indicates the company’s solvency by comparing the equity in the balance sheet to the balance sheet total, i.e. it tells how much equity the company has in relation to the total capital. The ratio is independent from the line of business, and the saleability of the property items in the balance sheet effect its interpretation. The equity ratio has been calculated using the formula: equity + provisions ———————————————— x 100 balance sheet total – advances received Directive values: over 40 % = good 20 - 40 % = satisfactory under 20 % = poor

	Return on assets, %

	Result before extraordinary items + costs of liabilities (12 months) ———————————————————————————— x 100 (Balance sheet total of the newest balance sheet + Balance sheet total of the previous balance sheet) / 2 The ratio measures the company’s ability to yield profit to the total capital tied in the business operations. Directive values: over 10 % good 5-10 % satisfactory under 5 % poor

	Gearing

	interest-bearing liabilities – cash and marketable securities —————————————————— equity The ratio measures the company’s financial structure, i.e. the relation between interest-bearing debts and equity. The ratio is independent from the business sector. When the value of the ratio is below one (1), it can be considered good.

	Debt to net sales ratio, %

	Short- and long-term liabilities + compulsory provisions - advances received (short- and long-term) ————————————————— x 100 Net sales (12 months) The ratio is used for evaluating what kind of internal financing requirement is set for the company by liabilities. Directive values: over 40 % good 40-80 % satisfactory under 80 % poor.

	Working capital, %

	Working capital (= Inventories + trade receivables (short-term) - trade payables (short-term) – advances received (short-term) ————————————————————————— x 100 Net sales (12 months) Working capital indicates the amount of financing tied up in the ongoing business operations of the company. In the working capital, %, working capital is compared with the turnover (net sales), as the working capital items are dependent on the turnover. The relation of the working capital required by the operations to the turnover is largely dependent on the business sector of the company. For example, when making forecasts, the working capital, % gives a very good picture of the financing needs that the expansion of operations causes.

	Inventory turnover ratio, %

	Inventories excl. advances paid (= materials and supplies + work in progress + finished goods + other inventories) ————————————————————————— x 100 Net sales (12 months) The ratio indicates the relation of inventories to turnover (net sales). The value of the ratio is dependent on the character of the business sector.

	Collection period of trade receivables (days)

	Trade receivables x 365 ——————————— Net sales (12 months) The ratio indicates the time how long it takes to collect trade receivables i.e. for how long sales are booked as trade receivables before the actual funds are received by the company.

	Payment period of trade payables (days)

	Trade payables from short-term liabilities x 365 —————————————————————— Purchases during the financial year + outsourced services (12 months) The ratio indicates to what extent on average the company has used the payment times offered by its suppliers.

	Payment default risk in the line of business

	The payment default risk refers to the percentual share of companies with payment defaults operating in the line of business in relation to all companies in the line. When calculating the payment default risk, only the payment default entries registered during the past year are taken into account.

	Bankruptcy risk in the line of business

	The bankruptcy risk refers to the percentual share of companies in the line of business against which a bankruptcy petition has been filed from all companies in the line. When calculating the bankruptcy risk, only the bankruptcy petitions registered during the past year are taken into account.