Comprehensive Accounting Ratios Suite
Computes 15+ core financial ratios spanning Profitability (ROE, ROA, Operating Margin), Liquidity (Current, Quick), Gearing/Solvency (Debt-to-Equity, Interest Cover), and Asset Turnover.
Computational Framework & Statutory Formulas
ROE (%) = Net Profit after Tax / Total Shareholders’ Equity × 100
Debt-to-Equity = Total Interest-Bearing Debt / Total Shareholders’ Equity
Interest Coverage = Operating Profit (EBIT) / Finance Cost (Interest Expense)
Asset Turnover = Total Revenue / Total Average Assets
Nigerian Economic & Statutory Context
Commercial banks, institutional investors, and statutory auditors rely on ratio analysis to assess loan repayment capability, going-concern assumptions, and management efficiency. Nigerian bank covenants frequently enforce minimum interest coverage ratios of 2.0x and maximum debt-to-equity ratios.
Frequently Asked Questions (FAQ)
What is considered a safe Interest Coverage Ratio for Nigerian companies?
Given high interest rates in Nigeria (often exceeding 20% to 28%), an Interest Coverage Ratio above 2.5x to 3.0x is generally required by commercial lenders. A ratio below 1.5x indicates acute vulnerability to interest rate increases or temporary revenue dips.
What is the DuPont Analysis and how does it decompose ROE?
DuPont Analysis breaks down Return on Equity into three components: Profit Margin (Net Profit / Sales) × Asset Turnover (Sales / Assets) × Financial Leverage (Assets / Equity). This helps auditors identify whether profitability is driven by operational efficiency or high debt leverage.