Every formula taught across the twenty lessons, in one place — the plain-English meaning, and the real worked example from Safaricom PLC or Equity Group Holdings PLC. No invented numbers: everything below is reused from the lessons.
A ratio only means something next to another number: the same company last year, or another company in the same industry. Comparing a telco's debt-to-equity to a bank's, or a bank's net profit margin to a telco's, compares unlike things — see Lessons 6, 9, and 12.
| Ratio | Formula | Meaning | Worked example |
|---|---|---|---|
| Net profit margin | Profit for the year ÷ Total revenue | How many shillings of profit survive out of every shilling of revenue. | Safaricom FY2024: 42,658.4 ÷ 349,447.2 = 12.2% FY2023: 52,482.8 ÷ 310,904.8 = 16.9% (a drop of 4.7 percentage points, not 4.7%) |
| Return on Equity (ROE) | Profit for the year ÷ Total shareholders' equity | How hard the owners' own money is working — profit per shilling of equity invested. | Safaricom FY2024: 42,658.4 ÷ 335,747.9 = 12.7% (FY2023: 19.9%) Equity Group FY2024: 43,826,758 ÷ 246,864,094 ≈ 17.8% (FY2023: ≈23.3%) |
| Ratio | Formula | Meaning | Worked example |
|---|---|---|---|
| Current ratio | Current assets ÷ Current liabilities | Can near-term assets cover bills due within a year? (a short-term question) | Safaricom FY2024: 82,541.9 ÷ 167,822.1 = 0.49 FY2023: 72,435.5 ÷ 140,377.2 = 0.52 Below 1.0 isn't automatic distress — Safaricom's steady operating cash flow (107,923.6) covers the gap. |
| Debt-to-equity | Total borrowings ÷ Total equity | How much debt sits on the business relative to what owners put in. | Safaricom FY2024: 108,147.1 ÷ 335,747.9 = 0.32 (FY2023: 0.33) Total borrowings = non-current 63,093.2 + current 45,053.9 |
| Debt-to-equity (bank proxy) | Total liabilities ÷ Total equity | Same idea, but banks have no separate "borrowings" line — deposits are the borrowed money, so total liabilities stands in. | Equity Group FY2024: 1,557,758,334 ÷ 246,864,094 = 6.31 FY2023: 1,603,299,418 ÷ 218,135,102 = 7.35 ~20x Safaricom's figure — reflects a different business model, not distress (Lesson 12). |
| Solvency cushion (bank) | Total shareholders' funds ÷ Total assets | What fraction of assets could shrink in value before equity is wiped out. | Equity Group FY2024: 246,864,094 ÷ 1,804,624,428 ≈ 13.7% |
| Leverage / funding-by-liabilities | Total liabilities ÷ Total assets | What share of everything the company owns was funded by other people's money. | Safaricom FY2024: 305,416.4 ÷ 641,164.3 ≈ 47.6% Equity Group FY2024: 1,557,758,334 ÷ 1,804,624,428 ≈ 86.3% |
| Ratio | Formula | Meaning | Worked example |
|---|---|---|---|
| Free Cash Flow (FCF) | Net cash from operating activities − Capital expenditure | Real cash left over after paying for the equipment/assets needed just to keep running or growing. | Safaricom FY2024: 107,923.6 − 97,628.6 = ≈10,295.0 Capex = property & equipment 66,636.1 + intangible assets 30,992.5. Thin FCF here reflects heavy Ethiopia reinvestment, not distress. |
| Ratio | Formula | Meaning | Worked example |
|---|---|---|---|
| Net Interest Income (NII) | Total interest income − Total interest expense | The gap between what a bank earns on loans and what it pays depositors/lenders — a bank's equivalent of gross profit. | Equity Group FY2024: 170,285,001 − 61,575,230 = 108,709,771 FY2023: 155,992,438 − 51,190,823 = 104,801,615 (NII grew only ~3.7% even though headline profit grew faster, because non-interest income also contributes) |
| Ratio | Formula | Meaning | Worked example |
|---|---|---|---|
| Earnings Per Share (EPS) | Profit for the year ÷ Number of shares outstanding | Profit sliced per share — useful for tracking one company over time, not for comparing companies (share counts are arbitrary). | Safaricom Basic EPS: FY2024 = KShs 1.6 (FY2023 also 1.6) Equity Group Basic & diluted EPS: FY2024 = KShs 12.34 (FY2023: 11.12, +~11%) |
| Price-to-Earnings (P/E) | Share price ÷ EPS | How many years of current earnings you're paying for in the share price; only compare within the same industry. | Safaricom: 35.95 ÷ 1.6 ≈ 22.5x (stale — mixes mid-2026 price with pre-split FY2024 EPS) Equity Group: 86.75 ÷ 12.34 ≈ 7.0x (also stale — Q1 2026 EPS was already 4.86 vs 3.92 a year earlier) Kenyan market rule of thumb: below ~10x often "low", above ~20x often "expensive" — varies by sector. |
| Dividend yield | Dividend per share ÷ Current share price | Cash return you get just for holding the share, independent of price appreciation. | Safaricom: single payment 0.85 ÷ 35.95 = 2.4%; TTM ≈ 4.17%; full FY2025 ≈ 7.27% (payout ratio 83.68%) Equity Group: 5.75 ÷ 86.75 ≈ 6.6% (FY2024 declared dividend, for reference, was 4.25) |
| Relationship | Formula | Meaning | Worked example |
|---|---|---|---|
| Accounting equation | Assets = Liabilities + Equity | Everything a company owns was paid for either by borrowing (liabilities) or by owners' own money (equity). | Safaricom FY2024 (KShs m): 305,416.4 + 335,747.9 = 641,164.3 Equity Group FY2024 (Shs'000): 1,557,758,334 + 246,864,094 ≈ 1,804,624,428 |
Before trusting any ratio above, run the headline profit number through three questions: (1) does profit move the same direction as revenue? (2) does profit move the same direction as operating cash flow? (3) how much of profit before tax comes from non-cash, non-operating items (e.g. Safaricom's hyperinflationary monetary gain, 22,363.2 in FY2024, ~26% of profit before tax)? A red flag is a question, not a verdict.
1) Is profit real cash? 2) Does it survive the red-flag checklist? 3) How efficient is the business (margins, ROE)? 4) Is the balance sheet sound (liquidity, leverage)? 5) Only then — does the price make sense (P/E, dividend yield)? A cheap-looking P/E on a business that fails the earlier questions is not a bargain.
Source: Lessons 0001–0020, Reading Financial Statements course. Companies: Safaricom PLC (KShs millions, FY ends 31 March) and Equity Group Holdings PLC (Shs'000, FY ends 31 December).
Something unclear, or want a formula walked through again against a specific lesson's numbers? Ask your teacher — that's what these sessions are for.