This document discusses various financial ratios used to analyze the financial performance and position of a company. It defines two categories of financial ratios - liquidity ratios and stability ratios. Liquidity ratios measure a company's ability to meet short-term obligations, and include current ratio, liquid ratio, absolute liquid ratio, and defensive interval ratio. Stability ratios indicate a company's long-term solvency and include fixed assets ratio, debt-equity ratio, proprietary ratio, and interest coverage ratio. The document also explains turnover ratios, profitability ratios, and how to calculate overall profitability.
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cost of capital
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bond
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preferred stock
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factors influencing cost of capital determination
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cost of new common stock
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cost of debt components
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cost of preferred stock
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components of cost of capital
Capital Employed is represented as total assets minus current liabilities. In other words, it is the value of the assets that contribute to a company’s ability to generate revenue
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cost of capital
,
bond
,
preferred stock
,
factors influencing cost of capital determination
,
cost of new common stock
,
cost of debt components
,
cost of preferred stock
,
components of cost of capital
Capital Employed is represented as total assets minus current liabilities. In other words, it is the value of the assets that contribute to a company’s ability to generate revenue
DuPont analysis is a useful technique to break down the different return on equity (ROE) generators. The ROE decomposition helps investors to concentrate separately on key indicators of financial success to define strengths and weaknesses.
Three main financial metrics drive equity return (ROE): operating performance, asset usage performance, and financial leverage. Operating output is a net profit margin or a net income separated by overall revenue or profits.
The efficiency of asset usage is determined by the turnover ratio of the assets. Leverage is calculated by the equity multiplier, equal to average assets divided by average equities.
The component parts of a firm's return on equity (ROE) are calculated using a DuPont analysis. This allows an investor to assess, which financial activities contribute the most to the ROE changes
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
time value of money
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concept of time value of money
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significance of time value of money
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present value vs future value
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solve for the present value
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simple vs compound interest rate
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nominal vs effective annual interest rates
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future value of a lump sum
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solve for the future value
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present value of a lump sum
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types of annuity
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future value of an annuity
Fund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences.
Financial Analysis tool containing all four types of ratios (liquidity ratio, capital structure or leverage ratio, turnover or activity ratio and profitability ratio)
DuPont analysis is a useful technique to break down the different return on equity (ROE) generators. The ROE decomposition helps investors to concentrate separately on key indicators of financial success to define strengths and weaknesses.
Three main financial metrics drive equity return (ROE): operating performance, asset usage performance, and financial leverage. Operating output is a net profit margin or a net income separated by overall revenue or profits.
The efficiency of asset usage is determined by the turnover ratio of the assets. Leverage is calculated by the equity multiplier, equal to average assets divided by average equities.
The component parts of a firm's return on equity (ROE) are calculated using a DuPont analysis. This allows an investor to assess, which financial activities contribute the most to the ROE changes
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
time value of money
,
concept of time value of money
,
significance of time value of money
,
present value vs future value
,
solve for the present value
,
simple vs compound interest rate
,
nominal vs effective annual interest rates
,
future value of a lump sum
,
solve for the future value
,
present value of a lump sum
,
types of annuity
,
future value of an annuity
Fund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences.
Financial Analysis tool containing all four types of ratios (liquidity ratio, capital structure or leverage ratio, turnover or activity ratio and profitability ratio)
for full text article go to : www.accountingchimp.com/ratio-analysis/
In this article of Ratio Analysis, you will learn how they can be used to analyze a company. Understand the meaning and formulas associated with Liquidity ratios, Profitability ratios, Turnover ratios, and Debt ratios
Prepare a witten financial analysis. .This should include calculation.pdfarrowit1
Prepare a witten financial analysis. .This should include calculations and discussion related to
the Chapter 5 appendix (Appendix 5A). See illustration 5A-1 for a summary of financial ratios.
Be sure to include (1) these ratios, (2) what they mean and (3) how you interpret them: o Current
ratio o Accounts receivable turnover o Inventory turnover o Profit margin on sales o Return on
assets o Return on stockholders\' equity o Debt to assets ratio Submit a WORD document via
D2L- Assessments - Assignments
Solution
Ans ) The ratios are not meant for a particular person or firm.People in various fields of life are
interested in ratio analysis from their own angles.The parties attached with business or firm are
creditors i.e. mony lenders, shareholders.Management uses the toolof Ratio analysisto
interpretate the information from their own angles.For example creditors are interested in
liquidity and solvency for which they will make use of current ratio , liquidity ratio,
proprietaryRatio, debt equity Ratio,capital gearing Ratio.Shareholders are interested in
profitability and long term solvency.They want to know the rate of return on their capital
employed for which they willmake use of Gross Profit Ratio, Operating Ratio, Dividend ratio
and Price Earning Ratio.Management is interested in overall efficiency of business which can be
better jud ged through Ratios like turnover to fixed assets, turnover to capital employed, stock
turnover ratio etc.So, from the above discussion it is clear that different prties uses the tool of
Ratio analysis for taking their own decisions
The particular purpose of a user is determining the particular Ratios that might be used ofr
financial analysis.Here we will discuss and calculate various ratios to do fianacial analysis.
Current Ratio = Current Assests/Current Liabilities
Current Assests= Cash + Bank+ Prepaid Insurance+Inventory+ Accounts Recievables
Current Assests=44746.5 +510+500+5000+29000=79756.5
Current Laibilites =Accounts payable
Current Laibilites= 30064.83
Current Ratio = 79756.5/30064.83= 2.7
Interpretation : Generally a current ratio of 2 times or 2:1 is cosidered to be satisfactory.Here the
current ratio of greater than 2 denotes the good liquidity position but it also indicates assest
liabilty mis match.But current ratio greater than 2 is generally preferred as compared to less than
2.
2.Account receivables turnover :It represents the number of times the cash is collected from
debtors.Lower turnover denotes poor collection and means that funds are blocked ofr longer
period of tiem and vice-versa.It also measure the liquidity of the firm.It shows how quickly
debtors (receivables) are converted into sales.The Account receivables turnover shows the
relationship between sales and debtors of the firm.
Account receivables turnover= Net Credit Annual Sales/Average trade debtors
3. Inventory turnover :This ratio indicates the number of times inventory or stock is replaced
during the year.The turnover of invent.
Financial ratios are indispensable to form a clear financial insight in the position of a company. They show the financial health and the potential of the company.
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The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
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The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
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Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
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6. Purpose of Ratios
Ratios measure the relationship between two or more
components of financial statements. They are used most
effectively when results over several periods are compared.
Financial Ratios
Financial ratios indicate the financial position of the
company.
7. Financial Ratios
Financial ratios can be divided into two broad categories.
1. Liquidity ratios
2. Stability Ratios
1. Liquidity ratios
* Current Ratio
* Liquid Ratio
* Absolute Liquid Ratio (Or) Cash Ratio (Or) Super Quick Ratio
* Defensive Interval Ratio
8. 2. Stability Ratios
*Fixed Assets Ratio
*Capital Gearing Ratio
*Debt Equity Ratio
*Proprietary Ratio
*Interest Coverage Ratio
9. Purpose of Current Ratio
The current ratio is an indicator of the
firms commitment to meet its short-term
liabilities.
Current Assets
Current Ratio =
Current Liabilities
Standard Norm: 2:1
10. Purpose of Liquid Ratio
The liquid ratio is ascertained by
comparing the liquid assets.
Quick / Liquid Assets
Liquid Ratio =
Liquid (or) Current Liabilities
Standard Norm: 1:1
11. Purpose of Absolute Liquid Ratio (Or) Cash Ratio (Or) Super Quick
Ratio
To measures the total liquidity available to the company.
Absolute liquid Assets
Absolute Liquid Ratio =
Current Liabilities
(Or)
Cash & bank + Short term securities
Absolute Liquid Ratio =
Current Liabilities
Standard Norm: 0.5
12. Purpose of Defensive Interval Ratio
This ratio examine the firms liquidity position in terms of ability to
meet daily expenditure from operations.
Quick Assets
Defensive Interval Ratio =
Projected Daily Cash Requirements
Projected cash operating expenses
Projected Daily Cash Requirements =
Number of days in a year
13. Purpose of Fixed Assets Ratio
To know whether the firm has raised adequate long-term
funds to meet its fixed assets requirements.
Fixed Assets
Fixed Assets Ratio =
Long term Funds
Purpose of Debt – Equity Ratio
The ratio indicates the relationship between the outsiders equities or Outsiders
funds and internal equities or shareholders funds.
Debts / External Equities / Outsiders Funds
Debt Equity Ratio =
Equity / Internal Equities / Shareholders Funds
(Or)
Debt Equity Ratio = Total Assets – Total Debts
Standard Norm: 2:1
14. Purpose of Proprietary Ratio
It indicates that the extent of shareholders funds in the total assets
employed in the business.
Proprietary Funds (or) Shareholders Funds
Proprietary Ratio =
Total tangible Assets
(Or)
Proprietary Ratio Capital Employed
Proprietary Ratio =
Total Liabilities
15. Purpose of Interest Coverage Ratio
Interest coverage ratio or Debt service ratio is used to test the
debt-servicing capacity of a firm.
Net Profit (before interest & tax)
Interest Coverage Ratio =
Fixed Interest Charges
16. Purpose of Capital Gearing ratio
The gearing ratio is a measure of financial risk
and expresses the amount of a company's debt in terms of
its equity.
Pref. Share capital + Long term debt + Fixed Asset
Capital Gearing Ratio =
E. Share Capital + Reserves & Surplus
18. Profitability Ratios
Purpose of Profitability ratios
Profitability ratios used to assess a
business's ability to generate earnings relative to its
revenue, operating costs, balance sheet assets, or
shareholders' equity over time, using data from a
specific point in time.
A. In related to Sales
B. In Related to Investments
19. Why is profitability ratio important?
Ratios that show returns represent the
firm's ability to measure the overall efficiency of
the firm in generating returns for its shareholders.
Purpose of Gross Profit Ratio
Performance of a company's sales and
production. It also relationship between gross
profit and net sales.
20. Purpose of Net Profit Ratio
It reveals the remaining profit after all costs of
production, administration, and financing have been deducted from
sales, and income taxes recognized.
Purpose of Operating Ratio
The operating ratio shows the efficiency of a
company's management by comparing the total operating expense
(OPEX) of a company to net sales. The operating ratio shows how
efficient a company's management is at keeping costs low while
generating revenue or sales.
21. Purpose of Operating Profit ratio
The operating profit ratio indicates
how much profit a company makes after paying
for variable costs of production such as wages,
raw materials, etc. It is also expressed as
a percentage of sales and then shows the
efficiency of a company controlling the costs and
expenses associated with business operations.
22. Purpose of Return on Investments (ROI)
ROI tries to directly measure the amount of return on
a particular investment, relative to the investment's cost.
Purpose of Return on Equity Capital
The return on equity ratio or ROE is a
profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the
company. ... This is an important measurement for potential
investors because they want to see how efficiently a
company will use their money to generate net income.
23. Purpose of Earnings per share (EPS)
Earnings per share or EPS is an
important financial measure, which indicates
the profitability of a company. It is calculated
by dividing the company's net income with its
total number of outstanding shares.
27. Turnover Ratios
The turnover ratios are also known as
activity or efficiency ratios. They indicate the
efficiency with which the capital employed is rotated
in the business.
The overall profitability of the business depends on two
factors:
i). The Rate of return on capital employed
ii). The Turnover ratios.
28. Overall Profitability Ratios
1. Net Profit Ratio
2. Turnover Ratio
Net Profit / Net Operating Profit
Net Profit Ratio =
Sales
Sales
Turnover Ratio =
Capital Employed
29. Purpose of Turnover Ratio
Turnover ratio indicates the number of times the capital has
been rotated in the process of doing business.
How to calculate the Overall Profitability Ratio
Overall Profitability Ratio = Net Profit Ratio x Turnover Ratio
30. Overall Profitability Ratio = Net Profit Ratio x Turnover Ratio
Net Profit Sales
= 100 x x
Sales Capital Employed
Net Profit
= x 100
Capital Employed
31. Purpose of Debtor Turnover Ratio
The Debtors Turnover Ratio also called as Receivables Turnover
Ratio shows how quickly the credit sales are converted into the cash. This ratio
measures the efficiency of a firm in managing and collecting the credit issued to the
customers.
Net Credit Sales / Total Sales
Debtors Turnover Ratio =
Average Debtors /Avg Accounts Receivables / Debtors
Net Credit Sales = Credit Sales – Sales Return
Opening Debtors + Opening Bills Receivables + Closing Debtors + Closing Bills
Receivables
Average Debtors =
2
32. Purpose of Credit Turnover Ratio
The ratio shows how well a company uses and
manages the credit it extends to customers and how quickly
that short-term debt is collected or is paid. The
accounts payable turnover ratio is used to quantify
the rate at which a company pays off its suppliers.
33. Credit Turnover Ratio
Net Credit Purchase
Creditors Turnover Ratio =
Average Payable / Average total Creditors
How to Calculate ?
Net Credit Purchase = Credit Purchase – Purchase Return
Accounts Payable Include = Trade Creditors & Bills Payable
Opening Creditors + Opening Bills Payables+ Closing Creditors
+ Closing Bills Payable
Average Payable / Average total Creditors =
2
34. Purpose of Stock (Or) Inventory Turnover Ratio
The ratio indicates whether investment in inventory is
efficiently used or not.
Cost of goods sold during the year
Inventory Turnover Ratio =
Average Inventory
Opening stock + Closing Stock
Average stock / Inventory =
2