Ratio Analysis
* Findings and Analysis:
Liquidity Ratio 1. Current Ratio: A company’s current assets divided by its current liabilities is known as the Current Ratio. This ratio is regarded as a measure of short-term debt paying ability. It measures the capability to obsolete the current liability with comparing to current asset by how many times. The equation is-
Current Ratio = Current AssetCurrent Liability * The general rule of thumb calls for a current ratio of at least 2:1. If it is greater than 2 then it creates income problem and if it is less than 2 then it creates liquidity problem.
For Northern Insurance Company Years | 2007 | 2008 | 2009 | 2010 | 2011 | Ratios | 1.59 | 1.66 | 1.89 | 1.72 | 1.91 |
Interpretation: From the above table and graph we can see that the ratios and the curve were consistently increasing during the calculated year except 2010. From Balance sheet we can see that Current Asset in the calculated year is significantly increase than the Current Liability. So Current Ratio is increasing in a consistant basis and the ratio which indicates that NORTHERN INSURANCE CO. has few problem with liquidity but they are generating profit efficiently.
Underwriting Ratios 2. Loss Ratio: A company’s loss ratio is calculated by dividing loss adjustments expenses by premiums earned. And los adjustment measured by dividing claim payment by net premium. Now this los ratio shows what percentage of payouts are being settled with recipients. It means lower the ratio better that is. If the ratio value is increase or higher that means the claim payment of that insurance increase and that indicates that, the management of that insurance is inefficient and ineffective. The equation is-
Loss Ratio = Loss AdjustmentEarn Payment
For Northern Insurance Company Years | 2007 | 2008 | 2009 | 2010 | 2011 | Ratios | 0.20 | 0.25 | 0.18 | 0.17 | 0.15 |
Interpretation: From the above table and graph we can see that the ratios and the curve were consistently
Liquidity Ratio 1. Current Ratio: A company’s current assets divided by its current liabilities is known as the Current Ratio. This ratio is regarded as a measure of short-term debt paying ability. It measures the capability to obsolete the current liability with comparing to current asset by how many times. The equation is-
Current Ratio = Current AssetCurrent Liability * The general rule of thumb calls for a current ratio of at least 2:1. If it is greater than 2 then it creates income problem and if it is less than 2 then it creates liquidity problem.
For Northern Insurance Company Years | 2007 | 2008 | 2009 | 2010 | 2011 | Ratios | 1.59 | 1.66 | 1.89 | 1.72 | 1.91 |
Interpretation: From the above table and graph we can see that the ratios and the curve were consistently increasing during the calculated year except 2010. From Balance sheet we can see that Current Asset in the calculated year is significantly increase than the Current Liability. So Current Ratio is increasing in a consistant basis and the ratio which indicates that NORTHERN INSURANCE CO. has few problem with liquidity but they are generating profit efficiently.
Underwriting Ratios 2. Loss Ratio: A company’s loss ratio is calculated by dividing loss adjustments expenses by premiums earned. And los adjustment measured by dividing claim payment by net premium. Now this los ratio shows what percentage of payouts are being settled with recipients. It means lower the ratio better that is. If the ratio value is increase or higher that means the claim payment of that insurance increase and that indicates that, the management of that insurance is inefficient and ineffective. The equation is-
Loss Ratio = Loss AdjustmentEarn Payment
For Northern Insurance Company Years | 2007 | 2008 | 2009 | 2010 | 2011 | Ratios | 0.20 | 0.25 | 0.18 | 0.17 | 0.15 |
Interpretation: From the above table and graph we can see that the ratios and the curve were consistently