RATIO ANALYSIS.pptx
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THIS SLIDES CONTAIN VARIOUSTYPES OF RATIO ANALYSYIS,OBJECTIVES AND A COMPANY BALANCESHEET FOR CLASS XI, XII, B.COM , BBA AND MBA. THIS SLIDES CAN BE FRUITFUL FOR BETTER UNDERSTANDING OF RATIO ANALYSIS. IF YOU LIKE THIS SLIDES SHARE WITH YOUR FRIENDS AND FAMILY MEMBERS .
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The document discusses ratio analysis, which involves calculating and interpreting various financial ratios to evaluate aspects of a company's performance and financial position. It defines key ratios including liquidity ratios, activity ratios, profitability ratios, and leverage ratios. It provides formulas and examples for specific ratios like current ratio, inventory turnover, debt-to-equity ratio, and return on equity. The purpose of ratio analysis is to help assess a company's liquidity, profitability, financial stability, and management quality.
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This document discusses ratio analysis and its applications. Ratio analysis involves comparing financial metrics and ratios to evaluate a company's performance over time, against its peers, and relative to industry benchmarks. The key types of ratios covered are liquidity ratios, solvency ratios, profitability ratios, efficiency ratios, coverage ratios, and market prospect ratios. Specific ratios discussed include the current ratio, debt-to-equity ratio, return on assets, inventory turnover, and dividend yield. The document emphasizes that ratio analysis is most insightful when trends are analyzed over time and when comparisons are made to competitors in the same industry.
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The document discusses ratio analysis, which involves calculating and interpreting various financial ratios to evaluate aspects of a company's performance and financial position. It defines key ratios including liquidity ratios, activity ratios, profitability ratios, and leverage ratios. It provides formulas and examples for specific ratios like current ratio, inventory turnover, debt-to-equity ratio, and return on equity. The purpose of ratio analysis is to help assess a company's liquidity, profitability, financial stability, and management quality.
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GAIL (India) Limited is India's largest natural gas processing and distribution company that is owned by the Government of India. Some key points:
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This document provides an overview of ratio analysis including:
- Ratio analysis refers to the relationship between inter-related financial figures expressed arithmetically.
- Ratios can be expressed as proportions, rates, or percentages.
- Ratios are classified as traditional (based on financial statements), functional (based on purpose), or liquidity, activity, financial, and profitability ratios.
- Liquidity ratios measure a company's ability to pay short-term debts by comparing liquid assets to liabilities. Key liquidity ratios discussed are current, quick, and absolute liquidity ratios.
- Activity or turnover ratios measure efficiency of asset usage, like inventory and debtors turnover ratios.
Explain the various categories of ratio analysis and provide example.pdf
Explain the various categories of ratio analysis and provide examples of at least two ratios in
each category. If you were an investor, which category would you be most interested in? Why?
Solution
Part-1
Ratios are used by lenders and business analysts to determine a company\'s financial stability and
standing.It\'s important to understand that financial ratios are time sensitive; they can only show
a picture of a business at a given time. There are five catagories of Financial ratios and those are
as follows :
Part-2 :
There are a large variety of ratios out there, but for an investor using financial ratios which are
broken up into four major categories: profitability ratios, liquidity ratios, solvency ratios and
valuation ratios. As an investor he should consider Profitability ratio because Profitability ratio is
a key piece of information that should be analyzed when you\'re considering investing in a
company. This is because high revenues alone don\'t necessarily translate into dividends for
investors unless a company is able to clear all of its expenses and costs. In general, the higher a
company\'s profit margin, the better, but as with most ratios, it is not enough to look at it in
isolation. It is important to compare it to the company\'s past levels, to the market average and to
its competitors.
Profitability Ratios : The profitability ratios are just what the name implies. They focus on the
firm\'s ability to generate a profit and an adequate return on assets and equity. They measure how
efficiently the firm uses its assets and how effectively it manages its operations and answers
questions like how efficiency his business and it helps to compare with other competitor.
Examples of Proftitablity ratios are Gross profit ratio, Net profit ratio, Operating profit ratio and
Return on investment ratio.
Market Value Ratios : The market value ratios can be calculated for publicly traded companies
only as they relate to stock price. There are many market value ratios, but a few of the most
commonly used are price/earnings (P/E), book value to share value and dividend yield .
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relationship between various long term forms of financing such as debentures (long term),
preference share capital and equity share capital including reserves and surpluses. Leverage or
capital structure ratios are calculated to test the long term financial position of a firm. Generally
capital gearing ratio is mainly calculated to analyse the leverage or capital structure of the firm.
Example of ratios are total debt ratios, the debt/equity ratio, the long-term debt ratio, the times
interest earned ratio, the fixed charge coverage ratio, and the cash coverage ratio.
Asset Efficiency or Turnover Ratios : The asset efficiency or turnover ratios measure the
efficiency with which the firm uses its assets to produce sales. As a result, it focuses on both the
income statement (sales) and the .
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This document provides an overview of ratio analysis including:
- Ratio analysis refers to the relationship between inter-related financial figures expressed arithmetically.
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Ratios are used by lenders and business analysts to determine a company\'s financial stability and
standing.It\'s important to understand that financial ratios are time sensitive; they can only show
a picture of a business at a given time. There are five catagories of Financial ratios and those are
as follows :
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There are a large variety of ratios out there, but for an investor using financial ratios which are
broken up into four major categories: profitability ratios, liquidity ratios, solvency ratios and
valuation ratios. As an investor he should consider Profitability ratio because Profitability ratio is
a key piece of information that should be analyzed when you\'re considering investing in a
company. This is because high revenues alone don\'t necessarily translate into dividends for
investors unless a company is able to clear all of its expenses and costs. In general, the higher a
company\'s profit margin, the better, but as with most ratios, it is not enough to look at it in
isolation. It is important to compare it to the company\'s past levels, to the market average and to
its competitors.
Profitability Ratios : The profitability ratios are just what the name implies. They focus on the
firm\'s ability to generate a profit and an adequate return on assets and equity. They measure how
efficiently the firm uses its assets and how effectively it manages its operations and answers
questions like how efficiency his business and it helps to compare with other competitor.
Examples of Proftitablity ratios are Gross profit ratio, Net profit ratio, Operating profit ratio and
Return on investment ratio.
Market Value Ratios : The market value ratios can be calculated for publicly traded companies
only as they relate to stock price. There are many market value ratios, but a few of the most
commonly used are price/earnings (P/E), book value to share value and dividend yield .
LEVERAGE RATIO /Capital Structure ration : The term capital structure refers to the
relationship between various long term forms of financing such as debentures (long term),
preference share capital and equity share capital including reserves and surpluses. Leverage or
capital structure ratios are calculated to test the long term financial position of a firm. Generally
capital gearing ratio is mainly calculated to analyse the leverage or capital structure of the firm.
Example of ratios are total debt ratios, the debt/equity ratio, the long-term debt ratio, the times
interest earned ratio, the fixed charge coverage ratio, and the cash coverage ratio.
Asset Efficiency or Turnover Ratios : The asset efficiency or turnover ratios measure the
efficiency with which the firm uses its assets to produce sales. As a result, it focuses on both the
income statement (sales) and the .
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FINANCIAL-STATEMENT-FINAL (1).pptx
The document discusses key elements of financial statement analysis including the four main financial statements, understanding the industry and company strategies, assessing the quality of financial statements, and analyzing current profitability and risk. It provides examples of various techniques used in financial statement analysis such as horizontal analysis, vertical analysis, common-size analysis, and calculating financial ratios to evaluate liquidity, asset management, debt, and profitability.
Financial Statement Analysis
This document discusses financial statement analysis and its importance. It covers key topics like the difference between an annual report and financial statements, tools for financial statement analysis including ratio analysis, horizontal analysis, and vertical analysis. Ratio analysis can evaluate a company's liquidity, asset management, debt management, profitability, and market value. The document also includes an example of fundamental analysis using financial ratios to evaluate a company. In summary, financial statement analysis is used to assess a company's financial health, make investment decisions, and plan for the future.
Ratios
The document provides background information on Apple Inc.'s founding and history. It was established in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne to sell the Apple I computer kit. In 2007, Apple Computer Inc. changed its name to Apple Inc. The document also discusses research methodology, objectives, limitations and definitions of ratio analysis as it relates to analyzing financial statements. Ratios simplify and summarize accounting figures to assess a company's performance, financial position, and efficiency.
Ratio analysis
This document discusses ratio analysis, which involves calculating and presenting relationships between financial statement items. Ratios are used to interpret financial statements and assess a firm's strengths/weaknesses, historical performance, and current financial condition. The document categorizes ratios into liquidity, capital structure/leverage, profitability, and activity ratios. It provides definitions and calculations for key ratios within each category such as current ratio, debt-to-equity ratio, net profit margin, inventory turnover ratio, and discusses how ratios can be used for analysis and comparison purposes.
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This document provides descriptions and explanations of various types of financial ratios used in ratio analysis. It discusses liquidity ratios like the current ratio and quick ratio, profitability ratios such as return on assets and return on equity, activity ratios including asset turnover and inventory turnover, capital structure ratios like the debt ratio, and market ratios like the price to earnings ratio. It also covers DuPont analysis, analysis of leverage, and sustainable growth rate. The ratios can be used to evaluate different aspects of a company's financial health and performance over time.
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Explain the various categories of ratio analysis and provide example.pdf
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RATIO ANALYSIS.pptx
- 1. PRESENTATION ON RATIO ANALYSIS GOLDY SINGH PRESENTED BY :
- 3. RATIO ANALYSIS • An study of financial statements with the help of ‘accounting ratio’ is termed as Ratio analysis. • “Ratio Analysis is a study of relationship among various financial factors in a . -Myers • Ratio analysis serves the purpose of various users who are interested in the financial statements. It simplifies, summarises and systematises the figures in the financial statement.
- 4. OBJECTIVES OF RATIOANALYSIS 1.To simplify the accounting information. 2.To determine liquidity of the business. 3.To assess the operating efficiency of the business. 4.To analyse the profitability of the business. 5.To help in comparative analysis, i.e., inter-firm and intra-firm
- 6. LIQUIDITY RATIO • Liquidity ratios are a measure of the ability of a company to pay off its short-term liabilities. Liquidity ratios determine how quickly a company can convert the assets and use them for meeting the dues that arise. The higher the ratio, the easier is the ability to clear the debts and avoid defaulting on payments. 1 . 2.
- 7. LEVERAGE / SOLVENCY RATIO • Solvency refers to the capacity of the business to pay its long term liability as and when it becomes due. So, The Solvency Ratios are used to know the company's capacity to pay its short & long term liabilities. Debt to Equity Ratio Total Assets to Debt Ratio Proprietary Ratio Interest coverage RATIO Solvency Ratio
- 8. 1. Debt to Equity Ratio The Debt to Equity ratio is used to compare the Equity (i.e. shareholder’s funds) with debts (i.e. outsider’s liabilities) of the business. FORMULA:- 2. Total Assets to Debt Ratio Total Assets to Debt Ratio is the ratio, through which the total assets of a company are expressed in relation to its long-term debts. It is a variation of the debt-equity ratio and gives the same indication as the debt-equity ratio. FORMULA:- Total assets to Debt ratio = TOTAL ASSETS DEBT
- 9. 3. Proprietary Ratio Proprietary ratio is a type of solvency ratio that is useful for determining the amount or contribution of shareholders or proprietors towards the total assets of the business. It is also known as equity ratio or shareholder equity ratio or net worth ratio. FORMULA:- 4. Interest coverage RATIO The interest coverage ratio is a debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. FORMULA:-
- 10. ACTIVITY RATIO
- 11. PROFATABILITY RATIO • Profitability ratios assess a company's ability to earn profits from its sales or operations, balance sheet assets, or shareholders' equity. Profitability ratios indicate how efficiently a company generates profit and value for shareholders. GROSS PROFIT RATIO OPERATING PROFOIT RATIO NET PROFIT RATIO RETURN ON ASSETS RETURN ON EQUITY TYPESOF PROFITABILITY RATIO