19-12-2012, 06:54 PM
RATIO ANALYSIS
1RATIO.ppt (Size: 355.5 KB / Downloads: 63)
PROPRIETARY RATIO
Proprietary Ratio establishes the relationships between the shareholders funds and the total of tangible assets. This ratio focuses the attention on the general financial strength of the enterprise. Higher the ratio will indicate lesser the danger to the creditors. Higher the ratio the better it is and vice versa. A ratio below 50% may be alarming for the creditors since they may have to lose heavily at the time of liquidation. Accordingly if we compare 2000 with 2001
Proprietary ratio has increased therefore it is better but the ratio is below 50% is alarming for the creditors since they have to loose heavily at the time of liquidation. During the year 2001 the proprietary ratio is better for the company.
WORKING CAPITAL RATIO
NOTES AND COMMENT : This is the ratio of current assets to current liabilites.
Working capital ratio of 2 :1 is considered as ideal. If the ratio is less than 2 it represents that the business does not enjoy adequate liquidity. However a ratio of more than 3 it represents that the firm is having idle funds which are not invested properly. Since the ratio for 2000 and 2001 are more than 2 it can be said that business is enjoying adequate liquidity. During the year 2001 the working capital ratio of the business is better than the year 2000. The working capital ratio can also be called as “ CURRENT ASSETS RATIO”.
RETURN ON CAPITAL EMPLOYED RATIO
NOTES AND COMMENT : This ratio reveals the earning capacity of the business on capital employed. The return on capital employed should always be more than the cost of capital employed. The higher the return on capital employed the better it is. Return on capital employed is also called as return on investment ratio. Since the return on capital employed ratio for the year 2001 is higher than that of 2000. It can be said that it is better for the year 2001 as compared to the year 2000.
1RATIO.ppt (Size: 355.5 KB / Downloads: 63)
PROPRIETARY RATIO
Proprietary Ratio establishes the relationships between the shareholders funds and the total of tangible assets. This ratio focuses the attention on the general financial strength of the enterprise. Higher the ratio will indicate lesser the danger to the creditors. Higher the ratio the better it is and vice versa. A ratio below 50% may be alarming for the creditors since they may have to lose heavily at the time of liquidation. Accordingly if we compare 2000 with 2001
Proprietary ratio has increased therefore it is better but the ratio is below 50% is alarming for the creditors since they have to loose heavily at the time of liquidation. During the year 2001 the proprietary ratio is better for the company.
WORKING CAPITAL RATIO
NOTES AND COMMENT : This is the ratio of current assets to current liabilites.
Working capital ratio of 2 :1 is considered as ideal. If the ratio is less than 2 it represents that the business does not enjoy adequate liquidity. However a ratio of more than 3 it represents that the firm is having idle funds which are not invested properly. Since the ratio for 2000 and 2001 are more than 2 it can be said that business is enjoying adequate liquidity. During the year 2001 the working capital ratio of the business is better than the year 2000. The working capital ratio can also be called as “ CURRENT ASSETS RATIO”.
RETURN ON CAPITAL EMPLOYED RATIO
NOTES AND COMMENT : This ratio reveals the earning capacity of the business on capital employed. The return on capital employed should always be more than the cost of capital employed. The higher the return on capital employed the better it is. Return on capital employed is also called as return on investment ratio. Since the return on capital employed ratio for the year 2001 is higher than that of 2000. It can be said that it is better for the year 2001 as compared to the year 2000.