Ratio analysis is a quantitative method used to analyze a company's financial statements by comparing various metrics. There are four main types of ratios: profitability, activity/turnover, liquidity, and solvency ratios. Profitability ratios measure operating efficiency and profit generation. Activity/turnover ratios measure how efficiently a company uses its assets and manages its inventory and receivables. Liquidity ratios measure a company's ability to meet its short-term obligations, and solvency ratios measure the company's long-term debt obligations and financial leverage. Ratio analysis is useful for managers in planning and decision making, and for investors, creditors, and employees to evaluate the company's financial position.

1. RATIO ANALYSIS, ITS USAGE AND TYPES OF RATIO
PRESENTED TO: PRESENTED BY:
DR. Amitabha Maheshwari Garima Lakhotiya
Anju kushwah
Anjali Bhadoriya
Sakshi Singh

2. RATIO ANALYSIS
 Ratio analysis is a quantitative method of gaining
insight into a company’s liquidity, operational
efficiency, and profitability by comparing information
contained in its financial statements.
 It is an art of establishing meaningful and logical
relationship between two or more than figures.

3. TYPES OF RATIOS
Profitability Ratio
Activity or Turnover Ratio
Liquidity Ratio
Solvency Ratio

4. Types of Profitability Ratio :
Gross Profit Ratio = Gross Profit ×100
Net Sales
Net Profit Ratio = Net Profit ×100
Net Sales
Return On Investment = EBIT
Capital
Employed
Earning Per Share = EATESH
No. of
Equity Share

5. Types of Activity or Turnover Ratio:
Stock Turnover Ratio = COGS
Average Stock
Debtors Turnover Ratio = Net Credit Sales
Average Debtors
Creditors Turnover Ratio = Net Credit Purchase
Average Creditors

6. Types of Liquidity Ratio:
Current Ratio = Current Assets
Current Liabilities
Liquid Ratio/Quick Ratio/Acid Test Ratio = Liquid Assets
Current Liabilities

7. Types of Solvency Ratio:
Debt Equity Ratio = Long-term Debts
Shareholders funds
Proprietory Ratio = Shareholders Funds
Total Assets

8. USAGE OF RATIO ANALYSIS
a). Managerial Uses Of Ratio Analysis
o Helps in financial forecasting and planning
o Helps in communicating
o Helps in decision making
o Helps in control
o Helps in co-ordination
b). Shareholders or investors can assess the financial
position of the concern where he is going to invest.

9. c). The creditors or suppliers extend short-term
credit to the concern.
d). The employees make use of information
available in financial statement to put forward their
viewpoint for the increase of wages and other
benefits. etc

10. THANKYOU