accessible and comprehensible. This very big data overload could seem astounding. Luckily‚ many well-tested ratios out there make the task a bit less daunting. Comparative ratio analysis helps you identify and quantify of the desert hotel company ’s strengths and weaknesses‚ evaluate its financial position‚ and understand the risks you may be taking. As with any other form of analysis‚ comparative ratio techniques are not definitive. Numerous off the balance sheet and income statement factors can play
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Financial Ratio: A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise ’s financial statements. Often used in accounting‚ there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm‚ by current and potential shareholders (owners) of a firm‚ and by a firm ’s creditors. Security analysts use financial ratios to compare
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http://www.investopedia.com/university/ratios/liquidity-measurement/default.asp LIQUIDITY RATIOS: The first ratios we’ll take a look at in this tutorial are the liquidity ratios. Liquidity ratios attempt to measure a company’s ability to pay off its short-term debt obligations. This is done by comparing a company’s most liquid assets (or‚ those that can be easily converted to cash)‚ its short-term liabilities. In general‚ the greater the coverage of liquid assets to short-term liabilities the
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Accounting ratios are relationships expressed in mathematical terms between the figures which are connected with each other in some manner. Obviously‚ no purpose is served by comparing two sets of figures which are not at all connected with each other. Moreover‚ absolute figures are also unfit for comparison. The following are the different classification of ratios: 1. Traditional classification: The traditional classification has been on the basis of the financial statement to which the determinants
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instances‚ its total investment. Financial leverage percentage= ROE-ROA 2011 2010 2009 Financial leverage percentage 1.69% 2.48% 1.22% In year 2009‚ the company have the lowest leverage ratio among the three years‚ thus it suggests that it utilizes relatively lowest debt in its capital structure this year‚ which indeed means Toyota has been investing most effectively (earning a high return on investment) or borrowing more effectively (paying
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Financial Ratios: What They MeanIn assessing the significance of various financial data‚ managers often engage in ratio analysis‚ the process of determining and evaluating financial ratios. A financial ratio is a relationship that indicates something about a company’s activities‚ such as the ratio between the company’s current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company’s financial statements that contain
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INTERPRETATION OF FINANCIAL STATEMENTS Ways of interpreting financial statements - Using individual items contained in financial statement. - Using ratios computed from items contained in Financial Statement (Ratio analysis) Reasons for interpreting accounts Accounts have to be analyzed and interpreted for the following logical points (1) Evaluation of the trading performance of a firm in order to have a measure of the quality of management running it. (2) Appraisal and monitoring
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RATIO ANALYSIS (ALL VALUES IN Rs. MILLION) 1. GROSS PROFIT MARGIN (%): GROSS PROFIT = NET SALES – COGS = TOTAL REVENUE – (Employee Benefit Expense + Operating and Other Expenses + Finance Costs) = 53107 – (22510+21598+1025) = 7974 GROSS PROFIT MARGIN = (NET SALES – COGS)/NET SALES = (7974/ 53107)*100 = 15.01497% 2. RETURN ON ASSET(RoA) RETURN ON ASSET = (PAT/TOTAL ASSET)*100 = (4606/63454)*100 = 7.258% This indicates that around 7.3% of all assets have been utilized
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Ratio | Industry benchmark ratio | Woolworths’ ratio | Brief Comment | Current Ratio | 1.2:1 | 0.80:1 | The current ratio ofWoolworth is considerablybelow industry average themovement from it is 33.33% (1.2-0.8)/1.2*100) Which is not really good for business | Liquid ratio | 0.7:1 | 0.34:1 | The Liquid ratio of Woolworth is considerably below industry average. The movement is 51.43 %. It is showed that the business may have problem in paying their debt.(0.7-0.34/0.7*100) | Gross Profit ratio
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Ratio Analysis Formulas 1) Financial ratios S.no | Ratio | Formula | Ideal ratio | comments | 1 | Current ratio | Current assetsCurrent liabilities | 2:1/1.33:1 | Indicates firm’s commitment to meet financial obligations.Avery heavy ratio is not desirable as it indicates less efficient use of funds | 2 | Quick ratio | Quick assetsCurrent liabilities | 1:1 | This ratio also indicates short term solvency of a firm | 3 | Debt –Equity ratios | long term debtequity | 1:2 | Indicates long
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