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Ratio analysis is a systematic technique of analysis and interpretation of financial statements…
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The basic limitation of ratio analysis is that it may be difficult to find a basis for making the comparisons…
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Reliability of the financial statements should be checked first as the ratio analysis is based on financial statements….
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The ratios can be classified under following different groups:…
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The different benchmarks against which ratios are compared as follows:…
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Liquid Ratio or Acid Test Ratio or Quick Ratio indicates the backing available to liquid liabilities in the form of liquid assets…
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Fixed Assets Turnover Ratio,Current Assets Turnover Ratio indicates that the current assets are turned over in the form of sales…
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Solvency Group: Under this group following ratios are calculated which indicates the long term financial prospects of the company…
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Gross Profit Ratio indicates the relation between production cost and sales and the efficiency with which…
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Return of Assets (ROA) measures the profitability of the investments in a firm. A higher ROA is always preferred….
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Capital Gearing Ratio,Earning Per Share (EPS),Formula for calculation P/E Ratio,Dividend Payment Ratio (D/P Ratio)…
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Formula to calculate current ratio = Current Assets/ Current Liabilities...Following precautions are required before drawing a conclusion from current ratio..
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Liquid Ratio or Acid Test Ratio or Quick Ratio is a liquidity ratio, indicates the backing available to liquid liabilities...Formula to calculate current ratio = Liquid Assets/ Liquid Liabilities …
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Formula to calculate Fixed assets turnover ratio = Net Sales/ Fixed Assets…
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Formula to calculate current assets turnover ratio = Liquid Assets/ Liquid Liabilities…
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Working Capital Turnover Ratio indicates that working capital i.e difference between current assets and current liabilities…
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Formula to calculate inventory turnover ratio = Cost of goods sold/ Average inventory…
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Debtors Turnover Ratio indicates the number of times average debtors are turned over during a year
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Capital Turnover Ratio indicates the efficiency of the organization with which the capital employed is being utilized…
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Debt Equity Ratio is one of the ratios of solvency group. It indicates the stake of shareholders and creditors in the organization…
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Proprietary Ratio also known as equity ratio indicates the relationship between the owners’ funds and total assets. …
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Fixed Assets/ Capital Employed Ratio indicate the extent to which the long term funds are sunk in fixed assets…
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Interest Coverage Ratio indicate protection available to the lenders of long term capital in the form of funds available…
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Debt Service Coverage Ratio (DSCR) is one of the most important ratios calculated by the financial institutions…
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Gross Profit Ratio indicates the relation between production cost and sales and the efficiency with which the goods..
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Formula to calculate EPS = (Net profit after taxes - Preference Dividend) / No. of equity shares outstanding …
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Price Earning Ratio (P/E Ratio) measures the expectation of the investors. It basically indicated…
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Net Profit Ratio indicates that portion of the sales which is left out with the owners after considering all types of expenses…
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Operating Ratio indicates the percentage of net sales which is absorbed by the operating costs….
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Return on Assets (ROA) measures the profitability of the investments in a firm. It is an indicator of the profitability…
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Return of Capital Employed (ROCE) is one of the ratios of overall profitability group, which measures the profitability…
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Return on Shareholders’ Funds is one of the ratios of overall profitability group, which indicates the profitability …
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Capital Gearing Ratio is one of the ratios of miscellaneous group, which measures the fixed income bearing …
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