11-05-2012, 02:20 PM
Financial Statement Analysis Ratio Analysis
Ratio-Analysis1.pdf (Size: 117.97 KB / Downloads: 164)
Ratio Analysis
A Ratio gives the mathematical relation ship between one
variable and another.
Ratio analysis helps in valuing the firm in quantitative terms.
Ratios are classified as follows
Liquidity Ratios
Ownership Ratios
o Earnings Ratios
o Leverage Ratios
Capital Structure Ratios
Coverage Ratios
Dividend Ratios
1) Liquidity Ratio s:
Liquidity implies firms ability to pay its debts in short run
This ability can be measured by Liquidity Ratios
Current Ratio and Quick Ratio are the two ratios which directly
measure Liquidity
Receivables turnover Ratio n Inventory Turnover Ratio are the
two ratios which in directly measure Liquidity
I. Current ratio = Current assets .
Current Liabilities
Current assets which are converted into cash within one
year
Current liabilities are liabilities which are to be repaid
within a period of 1 year.
Current Assets Current Liabilities
Cash Loans And Advances
Marketable Securities Trade Creditors
Debtors O.S.Expenses
Inventories Provisions
Loans and Advances Pre Received incomes
Prepaid Expenses
O.S.Incomes