## Schedule III – Mandatory Disclosure of Financial Ratios

Schedule III of the Companies Act, 2013 requires companies to disclose specified financial ratios as part of Additional Regulatory Information in the financial statements.

### List of 11 Mandatory Ratios

#	Ratio
1	Current Ratio
2	Debt-Equity Ratio
3	Debt Service Coverage Ratio
4	Return on Equity Ratio
5	Inventory Turnover Ratio
6	Trade Receivables Turnover Ratio
7	Trade Payables Turnover Ratio
8	Net Capital Turnover Ratio
9	Net Profit Ratio
10	Return on Capital Employed
11	Return on Investment

### Rules Relating to Disclosure

1. Numerator & Denominator: The company must explain what items are included in the numerator and denominator for each ratio.

2. 25% Change Rule: If any ratio changes by more than 25% compared to the preceding year, the company must provide an explanation for the change.

### Auditor's Role

The auditor must verify that:

All 11 ratios are disclosed.
Explanations for components are provided.
Any ratio with >25% change has been explained.

Worked example

### Example 1

Scenario: A company's Current Ratio changed from 1.6 (PY) to 2.2 (CY) — a change of 37.5%. What disclosure is required?

Answer: Since 37.5% > 25%, the company must provide an explanation for the change (e.g., reduction in current liabilities due to repayment of short-term loans, or increase in current assets due to higher inventory build-up). The auditor should verify this explanation and ensure it is disclosed in the financial statements.

### Example 2

Exam Tip (Any 3 Ratios question): Pick ratios from different categories to show breadth:

Liquidity: Current Ratio
Leverage: Debt-Equity Ratio
Profitability: Net Profit Ratio

Then state the rule: explain numerator/denominator, and explain if change > 25%.

⚠️ Common exam mistakes

Listing fewer than 11 ratios — in an exam asking to 'mention any 3', students sometimes think only 3 exist.
Forgetting the 25% change rule — this is a frequently tested disclosure requirement.
Confusing Schedule III ratio disclosures with voluntary MD&A disclosures — these are mandatory.

Bare-Act text Schedule III – Additional Regulatory Information (Ratio Disclosure Rules) · Companies Act, 2013 – Schedule III · click to expand

The company shall explain the items included in the numerator and denominator for computing the above ratios. Further, in case any ratio is not applicable to a Company, such ratio may not be furnished, with a note explaining the reason for the same. Further explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.

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