ratios

CONTENTS S.No. Title ACKNOWLDGEMENTS List of Tables Chapter 1. Introduction 1.1 Theoretical background 1.1.1 Use and significance of Ratio Analysis 1.1.2 Limitations 1.1.3 Classifications of ratios 1.2 Research Methodology 1.2.1 Need for the study 1.2.2 Scope of the study 1.2.3 Objectives of...

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Ratios can be classified on the basis of exposition into four broad groups. 1. Liquidity Ratio 2. Leverage Ratio 3. Profitability Ratio 4. Activity Ratio 1. Liquidity Ratio The impotence of adequate liquidity in the sense of the ability of the firm to meet current or short term...

Significance: 1. Current ratio is a measure of short term solvency 2. It indicates the firm’s ability to meet short term requirements 3. It represents a margin of safety to short term creditors Standard: Traditionally a current ratio of 2:1 is considered satisfactory. But...

COMPILATION OF RATIOS Ratio analysis is rightly considered as an invaluable tool of analysis. However, one has to exercise considerable degree of caution while analysing the financial statements with the aid of ratios. The precautions one has to take in ratio analysis are listed below: ...

Functional Classifications of Ratios The ratios may be grouped in accordance with the purposes they serve of the different users of accounting information. On this basis, the ratios are classified as follows: 1. Liquidity Ratios: These ratios analyze short-term and immediate financial...

Traditional Classification of Ratios Under this classification, the ratios readily suggest through their names, their respective sources. From this point of view, ratios are classified as follows: -  Balance Sheet Ratios or Financial Ratios: They deal with the relationships between two...

CLASSIFICATION OF RATIOS There is no dearth of financial ratios today. There are ratios for different purposes, for different types of users and for different types of analyses. Ratios can be grouped under the following heads: 1. Traditional classification, 2. Functional classification...

OBJECTIVES OF RATIOS Ratios are worked out to analyse the following aspects of a business organisatlon:  Solvency: (i) long-term. (ii) Short-term, (iii) immediate  Stability  Profitability  Operational efficiency  Credit standing  Structural analysis  Effective utilisation of...

COMPARISONS BY RATIOS Accounting ratios are very useful in assessing the financial position and profitability of a business enterprise. This can be achieved through comparison by ratios. Such a comparison may take any of the mentioned forms:  For the same enterprise over a number of years...

LEVERAGE RATIOS Leverage ratios or capital structure ratios are ratios which measures the relative interests of the owners and creditors in an enterprise. Further they measure the stake (risk) of the creditors as against the owners. Again they portray the long-term solvency of the...

FINANCIAL RATIOS This financial ratio is also known as ‘working capital ratio’ or ‘liquidity ratio’. It is extremely essential for a fir to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligations. These ratios...

PROFITABILITY RATIOS Profitability is an indication of the efficiency with which the operations of the business are carried on. Profitability ratios are of two types: those showing profitability in relation to sales and those showing profitability in relation to investments. Together...

TYPES OF RATIOS Several ratios are calculated from the accounting data, it can be grouped into various classes according to the financial activity or functions to be valuated. Short-term creditor’s main interest is in the liquidity position or the short term solvency position of the...

PROFITABILITY RATIOS PROFITABILITY RELATED TO SALES GP & NP Ratios The above graph shows the GP, NP and also the operating expenses. In the year 1989-1990, though GP was almost the same as previous year, NP has decreased from 7 .13% to 4.92 %. This signifies high operational costs during that...