HOW TO IDENTIFY FRACTIONS Introducing: whole number numerator fraction bar denominator improper.
UNIT - VIII. FINANCIAL ANALYSIS THROUGH RATIOS Introduction to Ratio A Ratio is only a comparison of...
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Transcript of UNIT - VIII. FINANCIAL ANALYSIS THROUGH RATIOS Introduction to Ratio A Ratio is only a comparison of...
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UNIT - VIII
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FINANCIAL ANALYSIS THROUGH RATIOS
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Introduction to Ratio
A Ratio is only a comparison of the numerator with the denominator. The term ratio refers to the numerical or quantitative relationship b/w two
figures. A ratio is relationship b/w two figures and obtained by dividing the former by
the latter.
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Classification of Ratios
Classification by Statements Classification by Users Classification by Importance Classification by Purpose
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Classification of Ratios (contd..)
CLASSIFICATION BY STATEMENT
Balance sheet ratios
1. Liquidity Ratio
2. Current Ratio
3. Stock Ratio
4. Proprietary Ratio
5. Dept-Equity Ratio
6. Capital Gearing Ratio
P & L Ratios
1. Grass profit Ratio
2. Net profit Ratio
3. Operating profit ratio
Inter-statement Ratios
1. Return on capital employed
2. Return on shareholders fund turnover of wc
3. Debtors turnover
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Classification of Ratios (contd..)
CLASSIFICATION BY USERS
Ratios for Mngt
1. Operating Ratio
2. Debtors Turnover
3. Stock Turnover
4. Solvency Ratio
5. Return on cap.
Ratios for Creditors
1. Current ratio
2. Solvency ratio
3. Fixed Assets ratio
4. Creditors turnover
Inter-statement Ratios
1. Yield Rate
2. Proprietary Ratio
3. Dividend rate Ratio
4. Capital Gearing ratio
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Classification of Ratios (contd..)
CLASSIFICATION BY IMPORTANCE
Primary Ratios
1. Asset Turnover
2. Profit Ratio
3. Operating profit
4. Return on Capital fund
Secondary Ratios
1. Working capital Ratio
2. Stocks to Current Assets
3. Stocks to Fixed Assets
4. Fixed Assets to Total Assets
5. Expenses Ratio
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Classification of Ratios (contd..)
CLASSIFICATION BY PURPOSE
SOLVENCY
(Stability)
PROFITABILITY ACTIVITY
(Performance)
EARNINGS
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Unit 6Ratio Analysis
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RATIO is a simple mathematical expression, which explains Quantitative Relationship between the two.
RATIO ANALYSIS is a technique of interpretation of financial statements.
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Classification of Ratios
1. Liquidity Ratios (short term solvency)
2. Leverage Ratios (long term solvency)
3. Turnover Ratios (performance)
4. Profitability Ratios
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Liquidity Ratios (short term solvency)
Current Ratio
Quick ratio
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Leverage Ratios (long term solvency)
Debt Equity Ratio
Proprietary Ratio
Fixed Assets Ratio
Interest Coverage Ratio
Dividend Coverage Ratio
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Turnover Ratios (performance)
Inventory Turn over ratio
Debtors Turn over ratio
Creditors Turn over ratio
Working Capital Turn over ratio
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Profitability Ratios
Gross Profit RatioNet Profit RatioOperating Profit RatioReturn on Capital EmployedReturn on Net WorthEarning Per Share (EPS)Dividends Per Share (DPS)Price Earning Ratio (P/E Ratio)