The document provides an overview of business ratios, their significance in evaluating financial performance, and the techniques for their computation. It covers operational, industry-specific, and financial ratios, emphasizing their applications in strategic planning and decision-making. Additionally, it outlines steps for calculating various types of ratios, including liquidity, profitability, efficiency, and leverage ratios.

1. Mastering Business RatiosEssential
Computation Techniques
HERE IS WHERE YOUR PRESENTATION
BEGINS

2. Contents 01 Understanding Ratios
02 Ratio Computation Techniques

3. 01
Understanding Ratios

4. Concept and Importance
Ratios are mathematical comparisons of two
or more quantities, crucial in assessing
various aspects of business performance,
financial health, efficiency, and profitability.
Business Applications
Businesses utilize ratios to gain insights into
financial health, performance metrics, and
operational success, aiding in strategic
decision- making and long- term planning.
Definition and Purpose of Ratios

5. Operational Ratios
Operational ratios measure efficiency and
effectiveness in utilizing resources, managing
operations, and maintaining productivity,
essential for optimizing business processes.
Industry-Specific Ratios
Industry- specific ratios tailor financial and operational
analysis to the unique characteristics and benchmarks of
specific industries, facilitating more accurate
performance comparisons and strategic insights.
Financial Ratios
These ratios assess financial health by
evaluating metrics like liquidity, profitability,
and solvency, providing insight into a
company's ability to meet obligations and
generate profit.
Types of Ratios

6. 02
Ratio Computation Techniques

7. Data Collection
Gather necessary financial
documents such as balance sheets,
income statements, and cash flow
statements to obtain accurate data
for ratio calculations.
Formula Application
Apply the relevant formulas to the
collected data, ensuring precise
calculations for financial analysis.
Each ratio requires specific data
points and mathematical operations.
Interpretation of Results
Analyze the computed ratios to
derive insights about the business's
financial health. This interpretation
aids in decision- making processes
and strategic planning.
Steps to Calculate Ratios

8. Liquidity Ratios
Calculate ratios like the current
ratio and quick ratio to assess the
company's ability to meet short-
term obligations using its most
liquid assets.
Profitability Ratios
Use ratios such as profit margin,
return on assets (ROA), and return
on equity (ROE) to evaluate the
company's ability to generate profit
from its operations and assets.
Efficiency Ratios
Determine efficiency ratios like
inventory turnover and accounts
receivable turnover to measure
how well the company utilizes its
assets to generate revenue.
Leverage Ratios
Assess leverage ratios, including
debt- to- equity ratio and interest
coverage ratio, to understand the
company's financial structure and
debt management.
Common Business Ratios and Their Computation

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